Correlation Between Ultrasmall Cap and Touchstone Small

Can any of the company-specific risk be diversified away by investing in both Ultrasmall Cap and Touchstone Small 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 Ultrasmall Cap and Touchstone Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ultrasmall Cap Profund Ultrasmall Cap and Touchstone Small Pany, you can compare the effects of market volatilities on Ultrasmall Cap and Touchstone Small 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 Ultrasmall Cap with a short position of Touchstone Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrasmall Cap and Touchstone Small.

Diversification Opportunities for Ultrasmall Cap and Touchstone Small

0.94

Correlation Coefficient

Ultrasmall Cap  Touchstone Small

Almost no diversification

The 3 months correlation between Ultrasmall and Touchstone is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Ultrasmall Cap Profund Ultrasm and Touchstone Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Small Pany and Ultrasmall Cap 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 Ultrasmall Cap Profund Ultrasmall Cap are associated (or correlated) with Touchstone Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Small Pany has no effect on the direction of Ultrasmall Cap i.e., Ultrasmall Cap and Touchstone Small go up and down completely randomly.

Pair Corralation between Ultrasmall Cap and Touchstone Small

Assuming the 90 days horizon Ultrasmall Cap Profund Ultrasmall Cap is expected to generate 2.44 times more return on investment than Touchstone Small. However, Ultrasmall Cap is 2.44 times more volatile than Touchstone Small Pany. It trades about 0.02 of its potential returns per unit of risk. Touchstone Small Pany is currently generating about 0.04 per unit of risk. If you would invest  6,341  in Ultrasmall Cap Profund Ultrasmall Cap on October 24, 2024 and sell it today you would earn a total of  845.00  from holding Ultrasmall Cap Profund Ultrasmall Cap or generate 13.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Ultrasmall Cap Profund Ultrasm  vs.  Touchstone Small Pany

Ultrasmall Cap Profund

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrasmall Cap Profund Ultrasmall Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ultrasmall Cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Touchstone Small Pany

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Small Pany are ranked lower than 2 (%) 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.

Pair Trading with Ultrasmall Cap and Touchstone Small

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

The idea behind Ultrasmall Cap Profund Ultrasmall Cap and Touchstone Small Pany 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.