Correlation Between Active Bond and Touchstone Small
Can any of the company-specific risk be diversified away by investing in both Active Bond and Touchstone Small 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 Active Bond and Touchstone Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Active Bond Fund and Touchstone Small Cap, you can compare the effects of market volatilities on Active Bond and Touchstone Small 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 Active Bond with a short position of Touchstone Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Active Bond and Touchstone Small.
Diversification Opportunities for Active Bond and Touchstone Small
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Active and Touchstone is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Active Bond Fund and Touchstone Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Small Cap and Active Bond 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 Active Bond Fund are associated (or correlated) with Touchstone Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Small Cap has no effect on the direction of Active Bond i.e., Active Bond and Touchstone Small go up and down completely randomly.
Pair Corralation between Active Bond and Touchstone Small
Assuming the 90 days horizon Active Bond is expected to generate 11.33 times less return on investment than Touchstone Small. But when comparing it to its historical volatility, Active Bond Fund is 4.83 times less risky than Touchstone Small. It trades about 0.12 of its potential returns per unit of risk. Touchstone Small Cap is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,824 in Touchstone Small Cap on September 4, 2024 and sell it today you would earn a total of 349.00 from holding Touchstone Small Cap or generate 9.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Active Bond Fund vs. Touchstone Small Cap
Performance |
| Timeline |
| Active Bond Fund |
| Touchstone Small Cap |
Active Bond and Touchstone Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Active Bond and Touchstone Small
The main advantage of trading using opposite Active Bond and Touchstone Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Active Bond position performs unexpectedly, Touchstone Small 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 Small will offset losses from the drop in Touchstone Small's long position.| Active Bond vs. Touchstone Small Cap | Active Bond vs. Touchstone Sands Capital | Active Bond vs. Mid Cap Growth | Active Bond vs. Mid Cap Growth |
| Touchstone Small vs. Issachar Fund Class | Touchstone Small vs. Semiconductor Ultrasector Profund | Touchstone Small vs. Volumetric Fund Volumetric | Touchstone Small vs. Nationwide Global Equity |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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