Correlation Between Touchstone Small and Blue Chip
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Blue Chip 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 Blue Chip 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 Blue Chip Growth, you can compare the effects of market volatilities on Touchstone Small and Blue Chip 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 Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Blue Chip.
Diversification Opportunities for Touchstone Small and Blue Chip
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Touchstone and Blue is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Blue Chip Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Growth 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 Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Growth has no effect on the direction of Touchstone Small i.e., Touchstone Small and Blue Chip go up and down completely randomly.
Pair Corralation between Touchstone Small and Blue Chip
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 1.58 times more return on investment than Blue Chip. However, Touchstone Small is 1.58 times more volatile than Blue Chip Growth. It trades about 0.28 of its potential returns per unit of risk. Blue Chip Growth is currently generating about 0.32 per unit of risk. If you would invest 3,824 in Touchstone Small Cap on September 4, 2024 and sell it today you would earn a total of 349.00 from holding Touchstone Small Cap or generate 9.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Small Cap vs. Blue Chip Growth
Performance |
| Timeline |
| Touchstone Small Cap |
| Blue Chip Growth |
Touchstone Small and Blue Chip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and Blue Chip
The main advantage of trading using opposite Touchstone Small and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Blue Chip 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 Blue Chip will offset losses from the drop in Blue Chip's long position.| Touchstone Small vs. Issachar Fund Class | Touchstone Small vs. Semiconductor Ultrasector Profund | Touchstone Small vs. Volumetric Fund Volumetric | Touchstone Small vs. Nationwide Global Equity |
| Blue Chip vs. Hennessy Bp Energy | Blue Chip vs. Adams Natural Resources | Blue Chip vs. Calvert Global Energy | Blue Chip vs. Gamco Natural Resources |
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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