Correlation Between Touchstone Small and Sentinel Low

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

Diversification Opportunities for Touchstone Small and Sentinel Low

-0.04

Correlation Coefficient

Touchstone Small  Sentinel Low

Good diversification

The 3 months correlation between Touchstone and Sentinel is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Sentinel Low Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Low Duration 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 Sentinel Low. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Low Duration has no effect on the direction of Touchstone Small i.e., Touchstone Small and Sentinel Low go up and down completely randomly.

Pair Corralation between Touchstone Small and Sentinel Low

Assuming the 90 days horizon Touchstone Small Cap is expected to under-perform the Sentinel Low. In addition to that, Touchstone Small is 9.43 times more volatile than Sentinel Low Duration. It trades about -0.14 of its total potential returns per unit of risk. Sentinel Low Duration is currently generating about 0.15 per unit of volatility. If you would invest  916.00  in Sentinel Low Duration on November 28, 2024 and sell it today you would earn a total of  8.00  from holding Sentinel Low Duration or generate 0.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Touchstone Small Cap  vs.  Sentinel Low Duration

Touchstone Small Cap

Risk-Adjusted Performance

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Sentinel Low Duration

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sentinel Low Duration are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Sentinel Low 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 Sentinel Low

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

The idea behind Touchstone Small Cap and Sentinel Low Duration 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.