Correlation Between High Yield and Touchstone Mid
Can any of the company-specific risk be diversified away by investing in both High Yield and Touchstone Mid 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 High Yield and Touchstone Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between High Yield Fund and Touchstone Mid Cap, you can compare the effects of market volatilities on High Yield and Touchstone Mid 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 High Yield with a short position of Touchstone Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Touchstone Mid.
Diversification Opportunities for High Yield and Touchstone Mid
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HIGH and Touchstone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Fund and Touchstone Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Mid Cap and High Yield 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 High Yield Fund are associated (or correlated) with Touchstone Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Mid Cap has no effect on the direction of High Yield i.e., High Yield and Touchstone Mid go up and down completely randomly.
Pair Corralation between High Yield and Touchstone Mid
Assuming the 90 days horizon High Yield is expected to generate 2.33 times less return on investment than Touchstone Mid. But when comparing it to its historical volatility, High Yield Fund is 3.74 times less risky than Touchstone Mid. It trades about 0.12 of its potential returns per unit of risk. Touchstone Mid Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,387 in Touchstone Mid Cap on September 3, 2024 and sell it today you would earn a total of 1,710 from holding Touchstone Mid Cap or generate 38.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
High Yield Fund vs. Touchstone Mid Cap
Performance |
| Timeline |
| High Yield Fund |
| Touchstone Mid Cap |
High Yield and Touchstone Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with High Yield and Touchstone Mid
The main advantage of trading using opposite High Yield and Touchstone Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Touchstone Mid 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 Mid will offset losses from the drop in Touchstone Mid's long position.| High Yield vs. Vanguard High Yield Corporate | High Yield vs. Vanguard High Yield Porate | High Yield vs. Blackrock Hi Yld | High Yield vs. Blackrock High Yield |
| Touchstone Mid vs. Legg Mason Partners | Touchstone Mid vs. Jp Morgan Smartretirement | Touchstone Mid vs. T Rowe Price | Touchstone Mid vs. Qs Moderate Growth |
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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