Correlation Between Small Cap and Touchstone Large
Can any of the company-specific risk be diversified away by investing in both Small Cap and Touchstone Large 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 Small Cap and Touchstone Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value and Touchstone Large Cap, you can compare the effects of market volatilities on Small Cap and Touchstone Large 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 Small Cap with a short position of Touchstone Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Touchstone Large.
Diversification Opportunities for Small Cap and Touchstone Large
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Touchstone is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Touchstone Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Large Cap and Small 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 Small Cap Value are associated (or correlated) with Touchstone Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Large Cap has no effect on the direction of Small Cap i.e., Small Cap and Touchstone Large go up and down completely randomly.
Pair Corralation between Small Cap and Touchstone Large
Assuming the 90 days horizon Small Cap Value is expected to under-perform the Touchstone Large. In addition to that, Small Cap is 1.97 times more volatile than Touchstone Large Cap. It trades about -0.33 of its total potential returns per unit of risk. Touchstone Large Cap is currently generating about -0.38 per unit of volatility. If you would invest 2,079 in Touchstone Large Cap on October 9, 2024 and sell it today you would lose (141.00) from holding Touchstone Large Cap or give up 6.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Touchstone Large Cap
Performance |
| Timeline |
| Small Cap Value |
| Touchstone Large Cap |
Small Cap and Touchstone Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Touchstone Large
The main advantage of trading using opposite Small Cap and Touchstone Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Touchstone Large 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 Large will offset losses from the drop in Touchstone Large's long position.| Small Cap vs. Value Fund Investor | Small Cap vs. Small Pany Fund | Small Cap vs. Mid Cap Value | Small Cap vs. Equity Income Fund |
| Touchstone Large vs. Touchstone Small Cap | Touchstone Large vs. Touchstone Sands Capital | Touchstone Large vs. Mid Cap Growth | Touchstone Large vs. Mid Cap Growth |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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