Correlation Between Touchstone International and Driehaus Emerging
Can any of the company-specific risk be diversified away by investing in both Touchstone International and Driehaus Emerging 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 Driehaus Emerging 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 Driehaus Emerging Markets, you can compare the effects of market volatilities on Touchstone International and Driehaus Emerging 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 Driehaus Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone International and Driehaus Emerging.
Diversification Opportunities for Touchstone International and Driehaus Emerging
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Touchstone and Driehaus is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone International Equit and Driehaus Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driehaus Emerging Markets 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 Driehaus Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driehaus Emerging Markets has no effect on the direction of Touchstone International i.e., Touchstone International and Driehaus Emerging go up and down completely randomly.
Pair Corralation between Touchstone International and Driehaus Emerging
Assuming the 90 days horizon Touchstone International Equity is expected to under-perform the Driehaus Emerging. In addition to that, Touchstone International is 1.03 times more volatile than Driehaus Emerging Markets. It trades about -0.21 of its total potential returns per unit of risk. Driehaus Emerging Markets is currently generating about -0.17 per unit of volatility. If you would invest 3,897 in Driehaus Emerging Markets on August 29, 2024 and sell it today you would lose (125.00) from holding Driehaus Emerging Markets or give up 3.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Touchstone International Equit vs. Driehaus Emerging Markets
Performance |
| Timeline |
| Touchstone International |
| Driehaus Emerging Markets |
Touchstone International and Driehaus Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone International and Driehaus Emerging
The main advantage of trading using opposite Touchstone International and Driehaus Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone International position performs unexpectedly, Driehaus Emerging 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 Driehaus Emerging will offset losses from the drop in Driehaus Emerging's long position.The idea behind Touchstone International Equity and Driehaus Emerging Markets 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.
| Driehaus Emerging vs. Driehaus Emerging Markets | Driehaus Emerging vs. Driehaus Emerging Markets | Driehaus Emerging vs. Driehaus International Small | Driehaus Emerging vs. Driehaus Smallmid Cap |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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