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 2025 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
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Touchstone is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2025 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 2025 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 is expected to generate 1.21 times less return on investment than Touchstone Small. But when comparing it to its historical volatility, American Funds 2025 is 2.58 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 of returns per unit of risk over similar time horizon. If you would invest 3,174 in Touchstone Small Cap on September 16, 2024 and sell it today you would earn a total of 868.00 from holding Touchstone Small Cap or generate 27.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2025 vs. Touchstone Small Cap
Performance |
| Timeline |
| American Funds 2025 |
| 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. Touchstone Small Cap | American Funds vs. Eagle Small Cap | American Funds vs. Kinetics Small Cap | American Funds vs. Champlain Small |
| Touchstone Small vs. Jpmorgan Diversified Fund | Touchstone Small vs. Lord Abbett Diversified | Touchstone Small vs. Guggenheim Diversified Income | Touchstone Small vs. Wealthbuilder Conservative Allocation |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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