Correlation Between Touchstone International and Smallcap World
Can any of the company-specific risk be diversified away by investing in both Touchstone International and Smallcap World 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 Smallcap World 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 Smallcap World Fund, you can compare the effects of market volatilities on Touchstone International and Smallcap World 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 Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone International and Smallcap World.
Diversification Opportunities for Touchstone International and Smallcap World
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Touchstone and Smallcap is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone International Equit and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World 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 Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Touchstone International i.e., Touchstone International and Smallcap World go up and down completely randomly.
Pair Corralation between Touchstone International and Smallcap World
Assuming the 90 days horizon Touchstone International Equity is expected to under-perform the Smallcap World. In addition to that, Touchstone International is 1.83 times more volatile than Smallcap World Fund. It trades about -0.15 of its total potential returns per unit of risk. Smallcap World Fund is currently generating about 0.13 per unit of volatility. If you would invest 6,510 in Smallcap World Fund on September 14, 2024 and sell it today you would earn a total of 130.00 from holding Smallcap World Fund or generate 2.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone International Equit vs. Smallcap World Fund
Performance |
| Timeline |
| Touchstone International |
| Smallcap World |
Touchstone International and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone International and Smallcap World
The main advantage of trading using opposite Touchstone International and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone International position performs unexpectedly, Smallcap World 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 Smallcap World will offset losses from the drop in Smallcap World's long position.The idea behind Touchstone International Equity and Smallcap World Fund 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.
| Smallcap World vs. Touchstone International Equity | Smallcap World vs. Ms Global Fixed | Smallcap World vs. Us Vector Equity | Smallcap World vs. Calamos 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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