Correlation Between Touchstone Small and Lkcm Small
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Lkcm Small 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 Lkcm Small 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 Lkcm Small Cap, you can compare the effects of market volatilities on Touchstone Small and Lkcm Small 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 Lkcm Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Lkcm Small.
Diversification Opportunities for Touchstone Small and Lkcm Small
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Touchstone and Lkcm is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Lkcm Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lkcm Small Cap 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 Lkcm Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lkcm Small Cap has no effect on the direction of Touchstone Small i.e., Touchstone Small and Lkcm Small go up and down completely randomly.
Pair Corralation between Touchstone Small and Lkcm Small
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 0.64 times more return on investment than Lkcm Small. However, Touchstone Small Cap is 1.57 times less risky than Lkcm Small. It trades about -0.11 of its potential returns per unit of risk. Lkcm Small Cap is currently generating about -0.16 per unit of risk. If you would invest 4,132 in Touchstone Small Cap on November 3, 2024 and sell it today you would lose (186.00) from holding Touchstone Small Cap or give up 4.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Small Cap vs. Lkcm Small Cap
Performance |
| Timeline |
| Touchstone Small Cap |
| Lkcm Small Cap |
Touchstone Small and Lkcm Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and Lkcm Small
The main advantage of trading using opposite Touchstone Small and Lkcm Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Lkcm Small 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 Lkcm Small will offset losses from the drop in Lkcm Small's long position.| Touchstone Small vs. Tiaa Cref Lifecycle Retirement | Touchstone Small vs. Putnman Retirement Ready | Touchstone Small vs. Tiaa Cref Lifestyle Moderate | Touchstone Small vs. Dimensional Retirement Income |
| Lkcm Small vs. Fulcrum Diversified Absolute | Lkcm Small vs. Jhancock Diversified Macro | Lkcm Small vs. Stone Ridge Diversified | Lkcm Small vs. Wilmington Diversified Income |
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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