Correlation Between Touchstone Large and Equity Income
Can any of the company-specific risk be diversified away by investing in both Touchstone Large and Equity Income 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 Equity Income 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 Equity Income Fund, you can compare the effects of market volatilities on Touchstone Large and Equity Income 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 Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Large and Equity Income.
Diversification Opportunities for Touchstone Large and Equity Income
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Touchstone and Equity is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Large Cap and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income 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 Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Touchstone Large i.e., Touchstone Large and Equity Income go up and down completely randomly.
Pair Corralation between Touchstone Large and Equity Income
Assuming the 90 days horizon Touchstone Large is expected to generate 1.07 times less return on investment than Equity Income. In addition to that, Touchstone Large is 1.06 times more volatile than Equity Income Fund. It trades about 0.35 of its total potential returns per unit of risk. Equity Income Fund is currently generating about 0.4 per unit of volatility. If you would invest 4,312 in Equity Income Fund on September 2, 2024 and sell it today you would earn a total of 266.00 from holding Equity Income Fund or generate 6.17% 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. Equity Income Fund
Performance |
| Timeline |
| Touchstone Large Cap |
| Equity Income |
Touchstone Large and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Large and Equity Income
The main advantage of trading using opposite Touchstone Large and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Large position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income's long position.| Touchstone Large vs. Vanguard Small Cap Value | Touchstone Large vs. Amg River Road | Touchstone Large vs. William Blair Small | Touchstone Large vs. Omni Small Cap Value |
| Equity Income vs. Enhanced Large Pany | Equity Income vs. Alternative Asset Allocation | Equity Income vs. Touchstone Large Cap | Equity Income vs. Morningstar Unconstrained 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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