Correlation Between Touchstone Small and Federated Total

Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Federated Total at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Touchstone Small and Federated Total into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Touchstone Small Cap and Federated Total Return, you can compare the effects of market volatilities on Touchstone Small and Federated Total and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Touchstone Small with a short position of Federated Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Federated Total.

Diversification Opportunities for Touchstone Small and Federated Total

-0.01

Correlation Coefficient

Touchstone Small  Federated Total

Good diversification

The 3 months correlation between Touchstone and Federated is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Federated Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Total Return and Touchstone Small is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Touchstone Small Cap are associated (or correlated) with Federated Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Total Return has no effect on the direction of Touchstone Small i.e., Touchstone Small and Federated Total go up and down completely randomly.

Pair Corralation between Touchstone Small and Federated Total

Assuming the 90 days horizon Touchstone Small Cap is expected to under-perform the Federated Total. In addition to that, Touchstone Small is 4.14 times more volatile than Federated Total Return. It trades about -0.32 of its total potential returns per unit of risk. Federated Total Return is currently generating about -0.43 per unit of volatility. If you would invest  947.00  in Federated Total Return on October 10, 2024 and sell it today you would lose (20.00) from holding Federated Total Return or give up 2.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Touchstone Small Cap  vs.  Federated Total Return

Touchstone Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Touchstone Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Federated Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Federated Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Federated Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Touchstone Small and Federated Total

The main advantage of trading using opposite Touchstone Small and Federated Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Federated Total can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Federated Total will offset losses from the drop in Federated Total's long position.

The idea behind Touchstone Small Cap and Federated Total Return pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.