Correlation Between ALPSSmith Credit and Touchstone Strategic

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Can any of the company-specific risk be diversified away by investing in both ALPSSmith Credit and Touchstone Strategic 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 ALPSSmith Credit and Touchstone Strategic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ALPSSmith Credit Opportunities and Touchstone Strategic Income, you can compare the effects of market volatilities on ALPSSmith Credit and Touchstone Strategic 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 ALPSSmith Credit with a short position of Touchstone Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALPSSmith Credit and Touchstone Strategic.

Diversification Opportunities for ALPSSmith Credit and Touchstone Strategic

0.63
  Correlation Coefficient

Poor diversification

The 3 months correlation between ALPSSmith and Touchstone is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ALPSSmith Credit Opportunities and Touchstone Strategic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Strategic and ALPSSmith Credit 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 ALPSSmith Credit Opportunities are associated (or correlated) with Touchstone Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Strategic has no effect on the direction of ALPSSmith Credit i.e., ALPSSmith Credit and Touchstone Strategic go up and down completely randomly.

Pair Corralation between ALPSSmith Credit and Touchstone Strategic

Assuming the 90 days horizon ALPSSmith Credit Opportunities is expected to generate 0.79 times more return on investment than Touchstone Strategic. However, ALPSSmith Credit Opportunities is 1.27 times less risky than Touchstone Strategic. It trades about 0.12 of its potential returns per unit of risk. Touchstone Strategic Income is currently generating about 0.05 per unit of risk. If you would invest  912.00  in ALPSSmith Credit Opportunities on August 29, 2024 and sell it today you would earn a total of  5.00  from holding ALPSSmith Credit Opportunities or generate 0.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ALPSSmith Credit Opportunities  vs.  Touchstone Strategic Income

 Performance 
       Timeline  
ALPSSmith Credit Opp 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ALPSSmith Credit Opportunities are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, ALPSSmith Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Touchstone Strategic 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Touchstone Strategic Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Touchstone Strategic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

ALPSSmith Credit and Touchstone Strategic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ALPSSmith Credit and Touchstone Strategic

The main advantage of trading using opposite ALPSSmith Credit and Touchstone Strategic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALPSSmith Credit position performs unexpectedly, Touchstone Strategic 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 Strategic will offset losses from the drop in Touchstone Strategic's long position.
The idea behind ALPSSmith Credit Opportunities and Touchstone Strategic Income 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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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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