Correlation Between Wilshire International and Touchstone International
Can any of the company-specific risk be diversified away by investing in both Wilshire International and Touchstone International 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 Wilshire International and Touchstone International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wilshire International Equity and Touchstone International Equity, you can compare the effects of market volatilities on Wilshire International and Touchstone International 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 Wilshire International with a short position of Touchstone International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wilshire International and Touchstone International.
Diversification Opportunities for Wilshire International and Touchstone International
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wilshire and Touchstone is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Wilshire International Equity and Touchstone International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone International and Wilshire International 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 Wilshire International Equity are associated (or correlated) with Touchstone International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone International has no effect on the direction of Wilshire International i.e., Wilshire International and Touchstone International go up and down completely randomly.
Pair Corralation between Wilshire International and Touchstone International
Assuming the 90 days horizon Wilshire International Equity is expected to under-perform the Touchstone International. In addition to that, Wilshire International is 1.13 times more volatile than Touchstone International Equity. It trades about -0.17 of its total potential returns per unit of risk. Touchstone International Equity is currently generating about -0.18 per unit of volatility. If you would invest 1,556 in Touchstone International Equity on October 22, 2024 and sell it today you would lose (165.00) from holding Touchstone International Equity or give up 10.6% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Wilshire International Equity vs. Touchstone International Equit
Performance |
Timeline |
Wilshire International |
Touchstone International |
Wilshire International and Touchstone International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Wilshire International and Touchstone International
The main advantage of trading using opposite Wilshire International and Touchstone International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilshire International position performs unexpectedly, Touchstone International 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 International will offset losses from the drop in Touchstone International's long position.The idea behind Wilshire International Equity and Touchstone International Equity 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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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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