Correlation Between Jennison Natural and Touchstone Sands
Can any of the company-specific risk be diversified away by investing in both Jennison Natural and Touchstone Sands 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 Jennison Natural and Touchstone Sands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jennison Natural Resources and Touchstone Sands Capital, you can compare the effects of market volatilities on Jennison Natural and Touchstone Sands 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 Jennison Natural with a short position of Touchstone Sands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jennison Natural and Touchstone Sands.
Diversification Opportunities for Jennison Natural and Touchstone Sands
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Jennison and Touchstone is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Jennison Natural Resources and Touchstone Sands Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Sands Capital and Jennison Natural 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 Jennison Natural Resources are associated (or correlated) with Touchstone Sands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Sands Capital has no effect on the direction of Jennison Natural i.e., Jennison Natural and Touchstone Sands go up and down completely randomly.
Pair Corralation between Jennison Natural and Touchstone Sands
Assuming the 90 days horizon Jennison Natural is expected to generate 18.99 times less return on investment than Touchstone Sands. But when comparing it to its historical volatility, Jennison Natural Resources is 1.07 times less risky than Touchstone Sands. It trades about 0.01 of its potential returns per unit of risk. Touchstone Sands Capital is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 820.00 in Touchstone Sands Capital on September 14, 2024 and sell it today you would earn a total of 835.00 from holding Touchstone Sands Capital or generate 101.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Jennison Natural Resources vs. Touchstone Sands Capital
Performance |
| Timeline |
| Jennison Natural Res |
| Touchstone Sands Capital |
Jennison Natural and Touchstone Sands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jennison Natural and Touchstone Sands
The main advantage of trading using opposite Jennison Natural and Touchstone Sands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jennison Natural position performs unexpectedly, Touchstone Sands 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 Sands will offset losses from the drop in Touchstone Sands' long position.The idea behind Jennison Natural Resources and Touchstone Sands Capital 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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