Correlation Between Touchstone Small and Voya Equity

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

Diversification Opportunities for Touchstone Small and Voya Equity

0.64

Correlation Coefficient

Touchstone Small  Voya Equity

Poor diversification

The 3 months correlation between Touchstone and Voya is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Voya Equity Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Equity Trust 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 Voya Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Equity Trust has no effect on the direction of Touchstone Small i.e., Touchstone Small and Voya Equity go up and down completely randomly.

Pair Corralation between Touchstone Small and Voya Equity

Assuming the 90 days horizon Touchstone Small Cap is expected to generate 1.03 times more return on investment than Voya Equity. However, Touchstone Small is 1.03 times more volatile than Voya Equity Trust. It trades about 0.03 of its potential returns per unit of risk. Voya Equity Trust is currently generating about -0.26 per unit of risk. If you would invest  3,479  in Touchstone Small Cap on October 24, 2024 and sell it today you would earn a total of  530.00  from holding Touchstone Small Cap or generate 15.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	9.33%
Values	Daily Returns

Touchstone Small Cap  vs.  Voya Equity Trust

Touchstone Small Cap

Risk-Adjusted Performance

5 of 100

Modest

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.

Voya Equity Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Equity Trust has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Voya Equity 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 Voya Equity

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

The idea behind Touchstone Small Cap and Voya Equity Trust 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.