Correlation Between American Funds and Touchstone Small
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Touchstone Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2040 and Touchstone Small Cap, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Touchstone Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Touchstone Small.
Diversification Opportunities for American Funds and Touchstone Small
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Touchstone is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2040 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 American Funds 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 American Funds 2040 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 American Funds i.e., American Funds and Touchstone Small go up and down completely randomly.
Pair Corralation between American Funds and Touchstone Small
Assuming the 90 days horizon American Funds 2040 is expected to generate 0.6 times more return on investment than Touchstone Small. However, American Funds 2040 is 1.66 times less risky than Touchstone Small. It trades about 0.11 of its potential returns per unit of risk. Touchstone Small Cap is currently generating about 0.05 per unit of risk. If you would invest 1,492 in American Funds 2040 on September 12, 2024 and sell it today you would earn a total of 619.00 from holding American Funds 2040 or generate 41.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
American Funds 2040 vs. Touchstone Small Cap
Performance |
| Timeline |
| American Funds 2040 |
| Touchstone Small Cap |
American Funds and Touchstone Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Touchstone Small
The main advantage of trading using opposite American Funds and Touchstone Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Cmg Ultra Short | American Funds vs. Touchstone Ultra Short | American Funds vs. Dreyfus Short Intermediate | American Funds vs. Blackrock Short Term Inflat Protected |
| Touchstone Small vs. Smallcap Growth Fund | Touchstone Small vs. Mutual Of America | Touchstone Small vs. Aqr Small Cap | Touchstone Small vs. Scout Small Cap |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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