Correlation Between Touchstone Small and Vanguard Growth

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

Diversification Opportunities for Touchstone Small and Vanguard Growth

0.41

Correlation Coefficient

Touchstone Small  Vanguard Growth

Very weak diversification

The 3 months correlation between Touchstone and Vanguard is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Vanguard Growth And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth And 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 Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth And has no effect on the direction of Touchstone Small i.e., Touchstone Small and Vanguard Growth go up and down completely randomly.

Pair Corralation between Touchstone Small and Vanguard Growth

Assuming the 90 days horizon Touchstone Small Cap is expected to under-perform the Vanguard Growth. In addition to that, Touchstone Small is 1.08 times more volatile than Vanguard Growth And. It trades about -0.03 of its total potential returns per unit of risk. Vanguard Growth And is currently generating about 0.08 per unit of volatility. If you would invest  10,243  in Vanguard Growth And on November 20, 2024 and sell it today you would earn a total of  399.00  from holding Vanguard Growth And or generate 3.9% return on investment over 90 days.

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

Touchstone Small Cap  vs.  Vanguard Growth And

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 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.

Vanguard Growth And

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth And are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Growth 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 Vanguard Growth

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

The idea behind Touchstone Small Cap and Vanguard Growth And 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.