Correlation Between Sentinel International and Touchstone Small
Can any of the company-specific risk be diversified away by investing in both Sentinel International 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 Sentinel International and Touchstone Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sentinel International Equity and Touchstone Small Cap, you can compare the effects of market volatilities on Sentinel International 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 Sentinel International with a short position of Touchstone Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentinel International and Touchstone Small.
Diversification Opportunities for Sentinel International and Touchstone Small
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sentinel and Touchstone is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel International Equity 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 Sentinel International 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 International Equity 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 Sentinel International i.e., Sentinel International and Touchstone Small go up and down completely randomly.
Pair Corralation between Sentinel International and Touchstone Small
Assuming the 90 days horizon Sentinel International Equity is expected to under-perform the Touchstone Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Sentinel International Equity is 1.77 times less risky than Touchstone Small. The mutual fund trades about -0.22 of its potential returns per unit of risk. The Touchstone Small Cap is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,873 in Touchstone Small Cap on August 28, 2024 and sell it today you would earn a total of 321.00 from holding Touchstone Small Cap or generate 8.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sentinel International Equity vs. Touchstone Small Cap
Performance |
| Timeline |
| Sentinel International |
| Touchstone Small Cap |
Sentinel International and Touchstone Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sentinel International and Touchstone Small
The main advantage of trading using opposite Sentinel International and Touchstone Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sentinel International 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.| Sentinel International vs. Touchstone Small Cap | Sentinel International vs. Touchstone Sands Capital | Sentinel International vs. Mid Cap Growth | Sentinel International vs. Mid Cap Growth |
| Touchstone Small vs. Legg Mason Bw | Touchstone Small vs. Old Westbury Large | Touchstone Small vs. Rational Strategic Allocation | Touchstone Small vs. Goldman Sachs Large |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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