Correlation Between New World and Touchstone Small
Can any of the company-specific risk be diversified away by investing in both New 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 New 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 New World Fund and Touchstone Small Cap, you can compare the effects of market volatilities on New 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 New World with a short position of Touchstone Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Touchstone Small.
Diversification Opportunities for New World and Touchstone Small
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between New and Touchstone is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding New 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 New 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 New 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 New World i.e., New World and Touchstone Small go up and down completely randomly.
Pair Corralation between New World and Touchstone Small
Assuming the 90 days horizon New World Fund is expected to under-perform the Touchstone Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, New World Fund is 2.43 times less risky than Touchstone Small. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Touchstone Small Cap is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 3,810 in Touchstone Small Cap on September 1, 2024 and sell it today you would earn a total of 367.00 from holding Touchstone Small Cap or generate 9.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Touchstone Small Cap
Performance |
| Timeline |
| New World Fund |
| Touchstone Small Cap |
New World and Touchstone Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Touchstone Small
The main advantage of trading using opposite New World and Touchstone Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New 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.| New World vs. Touchstone Small Cap | New World vs. Legg Mason Partners | New World vs. Kinetics Small Cap | New World vs. Ab Small Cap |
| Touchstone Small vs. Cutler Equity | Touchstone Small vs. Scharf Fund Retail | Touchstone Small vs. Huber Capital Equity | Touchstone Small vs. Icon Equity Income |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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