Correlation Between Touchstone Large and New Economy
Can any of the company-specific risk be diversified away by investing in both Touchstone Large and New Economy 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 New Economy 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 New Economy Fund, you can compare the effects of market volatilities on Touchstone Large and New Economy 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 New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Large and New Economy.
Diversification Opportunities for Touchstone Large and New Economy
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Touchstone and New is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Large Cap and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund 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 New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Touchstone Large i.e., Touchstone Large and New Economy go up and down completely randomly.
Pair Corralation between Touchstone Large and New Economy
Assuming the 90 days horizon Touchstone Large is expected to generate 1.4 times less return on investment than New Economy. But when comparing it to its historical volatility, Touchstone Large Cap is 1.31 times less risky than New Economy. It trades about 0.08 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,979 in New Economy Fund on September 4, 2024 and sell it today you would earn a total of 1,869 from holding New Economy Fund or generate 46.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Touchstone Large Cap vs. New Economy Fund
Performance |
| Timeline |
| Touchstone Large Cap |
| New Economy Fund |
Touchstone Large and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Large and New Economy
The main advantage of trading using opposite Touchstone Large and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Large position performs unexpectedly, New Economy 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 New Economy will offset losses from the drop in New Economy's long position.| Touchstone Large vs. Champlain Mid Cap | Touchstone Large vs. Pace Smallmedium Growth | Touchstone Large vs. Mid Cap Growth | Touchstone Large vs. T Rowe Price |
| New Economy vs. Smallcap World Fund | New Economy vs. New World Fund | New Economy vs. New Perspective Fund | New Economy vs. Investment Of America |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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