Correlation Between Smallcap World and Touchstone Small
Can any of the company-specific risk be diversified away by investing in both Smallcap World 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 Smallcap World and Touchstone Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and Touchstone Small Cap, you can compare the effects of market volatilities on Smallcap World 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 Smallcap World with a short position of Touchstone Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Touchstone Small.
Diversification Opportunities for Smallcap World and Touchstone Small
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smallcap and Touchstone is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Touchstone Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Small Cap and Smallcap World 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 Smallcap World Fund 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 Cap has no effect on the direction of Smallcap World i.e., Smallcap World and Touchstone Small go up and down completely randomly.
Pair Corralation between Smallcap World and Touchstone Small
Assuming the 90 days horizon Smallcap World is expected to generate 1.28 times less return on investment than Touchstone Small. But when comparing it to its historical volatility, Smallcap World Fund is 1.2 times less risky than Touchstone Small. It trades about 0.02 of its potential returns per unit of risk. Touchstone Small Cap is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,342 in Touchstone Small Cap on October 13, 2024 and sell it today you would earn a total of 400.00 from holding Touchstone Small Cap or generate 11.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Touchstone Small Cap
Performance |
| Timeline |
| Smallcap World |
| Touchstone Small Cap |
Smallcap World and Touchstone Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Touchstone Small
The main advantage of trading using opposite Smallcap World and Touchstone Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World 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.| Smallcap World vs. Dunham Real Estate | Smallcap World vs. Deutsche Real Estate | Smallcap World vs. Neuberger Berman Real | Smallcap World vs. Dfa Real Estate |
| Touchstone Small vs. Dws Equity Sector | Touchstone Small vs. Smallcap World Fund | Touchstone Small vs. Siit Equity Factor | Touchstone Small vs. Qs Global Equity |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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