Correlation Between Touchstone Large and Small Cap
Can any of the company-specific risk be diversified away by investing in both Touchstone Large and Small Cap 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 Touchstone Large and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Touchstone Large Cap and Small Cap Growth, you can compare the effects of market volatilities on Touchstone Large and Small Cap 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 Touchstone Large with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Large and Small Cap.
Diversification Opportunities for Touchstone Large and Small Cap
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Touchstone and Small is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Large Cap and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Touchstone Large 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 Touchstone Large Cap are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of Touchstone Large i.e., Touchstone Large and Small Cap go up and down completely randomly.
Pair Corralation between Touchstone Large and Small Cap
Assuming the 90 days horizon Touchstone Large is expected to generate 1.56 times less return on investment than Small Cap. But when comparing it to its historical volatility, Touchstone Large Cap is 1.7 times less risky than Small Cap. It trades about 0.18 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,228 in Small Cap Growth on August 28, 2024 and sell it today you would earn a total of 268.00 from holding Small Cap Growth or generate 12.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Large Cap vs. Small Cap Growth
Performance |
| Timeline |
| Touchstone Large Cap |
| Small Cap Growth |
Touchstone Large and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Large and Small Cap
The main advantage of trading using opposite Touchstone Large and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Large position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Touchstone Large vs. Us Government Securities | Touchstone Large vs. Lord Abbett Government | Touchstone Large vs. Inverse Government Long | Touchstone Large vs. Us Government Plus |
| Small Cap vs. Aqr Large Cap | Small Cap vs. William Blair Large | Small Cap vs. Touchstone Large Cap | Small Cap vs. T Rowe Price |
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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