Correlation Between Touchstone International and Capital Income
Can any of the company-specific risk be diversified away by investing in both Touchstone International and Capital 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 International and Capital Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Touchstone International Equity and Capital Income Builder, you can compare the effects of market volatilities on Touchstone International and Capital 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 International with a short position of Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone International and Capital Income.
Diversification Opportunities for Touchstone International and Capital Income
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Touchstone and Capital is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone International Equit and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder and Touchstone International 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 International Equity are associated (or correlated) with Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Touchstone International i.e., Touchstone International and Capital Income go up and down completely randomly.
Pair Corralation between Touchstone International and Capital Income
Assuming the 90 days horizon Touchstone International is expected to generate 1.6 times less return on investment than Capital Income. In addition to that, Touchstone International is 1.78 times more volatile than Capital Income Builder. It trades about 0.04 of its total potential returns per unit of risk. Capital Income Builder is currently generating about 0.12 per unit of volatility. If you would invest 6,758 in Capital Income Builder on September 12, 2024 and sell it today you would earn a total of 502.00 from holding Capital Income Builder or generate 7.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone International Equit vs. Capital Income Builder
Performance |
| Timeline |
| Touchstone International |
| Capital Income Builder |
Touchstone International and Capital Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone International and Capital Income
The main advantage of trading using opposite Touchstone International and Capital Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone International position performs unexpectedly, Capital 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 Capital Income will offset losses from the drop in Capital Income's long position.The idea behind Touchstone International Equity and Capital Income Builder pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Capital Income vs. Touchstone International Equity | Capital Income vs. Scharf Fund Retail | Capital Income vs. Sarofim Equity | Capital Income vs. Rbc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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