Correlation Between Touchstone Small and Blue Chip

Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Blue Chip 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 Blue Chip 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 Blue Chip Growth, you can compare the effects of market volatilities on Touchstone Small and Blue Chip 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 Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Blue Chip.

Diversification Opportunities for Touchstone Small and Blue Chip

0.74

Correlation Coefficient

Touchstone Small  Blue Chip

Poor diversification

The 3 months correlation between Touchstone and Blue is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Blue Chip Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Growth 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 Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Growth has no effect on the direction of Touchstone Small i.e., Touchstone Small and Blue Chip go up and down completely randomly.

Pair Corralation between Touchstone Small and Blue Chip

Assuming the 90 days horizon Touchstone Small Cap is expected to generate 0.77 times more return on investment than Blue Chip. However, Touchstone Small Cap is 1.3 times less risky than Blue Chip. It trades about 0.19 of its potential returns per unit of risk. Blue Chip Growth is currently generating about 0.03 per unit of risk. If you would invest  3,850  in Touchstone Small Cap on October 25, 2024 and sell it today you would earn a total of  125.00  from holding Touchstone Small Cap or generate 3.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Touchstone Small Cap  vs.  Blue Chip Growth

Touchstone Small Cap

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Small Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

Blue Chip Growth

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Chip Growth are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Blue Chip 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 Blue Chip

The main advantage of trading using opposite Touchstone Small and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Blue Chip 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 Blue Chip will offset losses from the drop in Blue Chip's long position.

The idea behind Touchstone Small Cap and Blue Chip Growth 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.