Correlation Between Touchstone Small and American High-income
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and American High-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 Small and American High-income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Touchstone Small Cap and American High Income Municipal, you can compare the effects of market volatilities on Touchstone Small and American High-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 Small with a short position of American High-income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and American High-income.
Diversification Opportunities for Touchstone Small and American High-income
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Touchstone and American is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and American High Income Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American High Income and Touchstone Small 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 Small Cap are associated (or correlated) with American High-income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American High Income has no effect on the direction of Touchstone Small i.e., Touchstone Small and American High-income go up and down completely randomly.
Pair Corralation between Touchstone Small and American High-income
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 4.52 times more return on investment than American High-income. However, Touchstone Small is 4.52 times more volatile than American High Income Municipal. It trades about 0.3 of its potential returns per unit of risk. American High Income Municipal is currently generating about 0.16 per unit of risk. If you would invest 3,824 in Touchstone Small Cap on September 3, 2024 and sell it today you would earn a total of 353.00 from holding Touchstone Small Cap or generate 9.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Small Cap vs. American High Income Municipal
Performance |
| Timeline |
| Touchstone Small Cap |
| American High Income |
Touchstone Small and American High-income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and American High-income
The main advantage of trading using opposite Touchstone Small and American High-income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, American High-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 American High-income will offset losses from the drop in American High-income's long position.| Touchstone Small vs. Vanguard Small Cap Value | Touchstone Small vs. Vanguard Small Cap Value | Touchstone Small vs. Us Small Cap | Touchstone Small vs. Us Targeted Value |
| American High-income vs. T Rowe Price | American High-income vs. T Rowe Price | American High-income vs. John Hancock Funds | American High-income vs. T Rowe Price |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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