Correlation Between Touchstone Small and First Trust
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and First Trust 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 First Trust 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 First Trust Short, you can compare the effects of market volatilities on Touchstone Small and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and First Trust.
Diversification Opportunities for Touchstone Small and First Trust
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Touchstone and First is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Touchstone Small i.e., Touchstone Small and First Trust go up and down completely randomly.
Pair Corralation between Touchstone Small and First Trust
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 14.89 times more return on investment than First Trust. However, Touchstone Small is 14.89 times more volatile than First Trust Short. It trades about 0.3 of its potential returns per unit of risk. First Trust Short 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Small Cap vs. First Trust Short
Performance |
| Timeline |
| Touchstone Small Cap |
| First Trust Short |
Touchstone Small and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and First Trust
The main advantage of trading using opposite Touchstone Small and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust'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 |
| First Trust vs. Small Midcap Dividend Income | First Trust vs. Chartwell Small Cap | First Trust vs. Us Small Cap | First Trust vs. Touchstone Small 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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