Correlation Between Touchstone Small and Small Pany

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

Diversification Opportunities for Touchstone Small and Small Pany

0.93

Correlation Coefficient

Touchstone Small  Small Pany

Almost no diversification

The 3 months correlation between Touchstone and Small is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany 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 Small Pany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Touchstone Small i.e., Touchstone Small and Small Pany go up and down completely randomly.

Pair Corralation between Touchstone Small and Small Pany

Assuming the 90 days horizon Touchstone Small is expected to generate 3.04 times less return on investment than Small Pany. But when comparing it to its historical volatility, Touchstone Small Cap is 1.35 times less risky than Small Pany. It trades about 0.23 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest  1,302  in Small Pany Growth on August 31, 2024 and sell it today you would earn a total of  340.00  from holding Small Pany Growth or generate 26.11% return on investment over 90 days.

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

Touchstone Small Cap  vs.  Small Pany Growth

Touchstone Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady basic indicators, Touchstone Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Small Pany Growth

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 27 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Small Pany showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Touchstone Small and Small Pany

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

The idea behind Touchstone Small Cap and Small Pany 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.