Correlation Between Touchstone Mid and Paradigm Micro-cap
Can any of the company-specific risk be diversified away by investing in both Touchstone Mid and Paradigm Micro-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 Mid and Paradigm Micro-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Touchstone Mid Cap and Paradigm Micro Cap Fund, you can compare the effects of market volatilities on Touchstone Mid and Paradigm Micro-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 Mid with a short position of Paradigm Micro-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Mid and Paradigm Micro-cap.
Diversification Opportunities for Touchstone Mid and Paradigm Micro-cap
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Touchstone and Paradigm is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Mid Cap and Paradigm Micro Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Micro Cap and Touchstone Mid 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 Mid Cap are associated (or correlated) with Paradigm Micro-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Micro Cap has no effect on the direction of Touchstone Mid i.e., Touchstone Mid and Paradigm Micro-cap go up and down completely randomly.
Pair Corralation between Touchstone Mid and Paradigm Micro-cap
Assuming the 90 days horizon Touchstone Mid is expected to generate 1.02 times less return on investment than Paradigm Micro-cap. But when comparing it to its historical volatility, Touchstone Mid Cap is 1.51 times less risky than Paradigm Micro-cap. It trades about 0.34 of its potential returns per unit of risk. Paradigm Micro Cap Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 5,599 in Paradigm Micro Cap Fund on September 1, 2024 and sell it today you would earn a total of 413.00 from holding Paradigm Micro Cap Fund or generate 7.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Mid Cap vs. Paradigm Micro Cap Fund
Performance |
| Timeline |
| Touchstone Mid Cap |
| Paradigm Micro Cap |
Touchstone Mid and Paradigm Micro-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Mid and Paradigm Micro-cap
The main advantage of trading using opposite Touchstone Mid and Paradigm Micro-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Mid position performs unexpectedly, Paradigm Micro-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 Paradigm Micro-cap will offset losses from the drop in Paradigm Micro-cap's long position.| Touchstone Mid vs. Value Line Mid | Touchstone Mid vs. Boston Partners All Cap | Touchstone Mid vs. Scout Mid Cap | Touchstone Mid vs. Paradigm Select Fund |
| Paradigm Micro-cap vs. Paradigm Select Fund | Paradigm Micro-cap vs. Needham Aggressive Growth | Paradigm Micro-cap vs. Ultramid Cap Profund Ultramid Cap | Paradigm Micro-cap vs. Towle Deep Value |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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