Correlation Between Sentinel Balanced and Touchstone Arbitrage
Can any of the company-specific risk be diversified away by investing in both Sentinel Balanced and Touchstone Arbitrage 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 Sentinel Balanced and Touchstone Arbitrage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sentinel Balanced Fund and Touchstone Arbitrage Fund, you can compare the effects of market volatilities on Sentinel Balanced and Touchstone Arbitrage 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 Sentinel Balanced with a short position of Touchstone Arbitrage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentinel Balanced and Touchstone Arbitrage.
Diversification Opportunities for Sentinel Balanced and Touchstone Arbitrage
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sentinel and Touchstone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Balanced Fund and Touchstone Arbitrage Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Arbitrage and Sentinel Balanced 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 Sentinel Balanced Fund are associated (or correlated) with Touchstone Arbitrage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Arbitrage has no effect on the direction of Sentinel Balanced i.e., Sentinel Balanced and Touchstone Arbitrage go up and down completely randomly.
Pair Corralation between Sentinel Balanced and Touchstone Arbitrage
Assuming the 90 days horizon Sentinel Balanced Fund is expected to generate 3.95 times more return on investment than Touchstone Arbitrage. However, Sentinel Balanced is 3.95 times more volatile than Touchstone Arbitrage Fund. It trades about 0.09 of its potential returns per unit of risk. Touchstone Arbitrage Fund is currently generating about 0.23 per unit of risk. If you would invest 2,808 in Sentinel Balanced Fund on August 27, 2024 and sell it today you would earn a total of 26.00 from holding Sentinel Balanced Fund or generate 0.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sentinel Balanced Fund vs. Touchstone Arbitrage Fund
Performance |
| Timeline |
| Sentinel Balanced |
| Touchstone Arbitrage |
Sentinel Balanced and Touchstone Arbitrage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sentinel Balanced and Touchstone Arbitrage
The main advantage of trading using opposite Sentinel Balanced and Touchstone Arbitrage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sentinel Balanced position performs unexpectedly, Touchstone Arbitrage 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 Arbitrage will offset losses from the drop in Touchstone Arbitrage's long position.| Sentinel Balanced vs. Sentinel Mon Stock | Sentinel Balanced vs. Sentinel International Equity | Sentinel Balanced vs. Sentinel Small Pany | Sentinel Balanced vs. Sentinel Balanced Fund |
| Touchstone Arbitrage vs. Touchstone Small Cap | Touchstone Arbitrage vs. Touchstone Sands Capital | Touchstone Arbitrage vs. Mid Cap Growth | Touchstone Arbitrage vs. Mid Cap Growth |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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