Correlation Between Touchstone Small and Western Asset
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Western Asset 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 Western Asset 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 Western Asset Smash, you can compare the effects of market volatilities on Touchstone Small and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Western Asset.
Diversification Opportunities for Touchstone Small and Western Asset
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Touchstone and Western is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Western Asset Smash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Smash 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Smash has no effect on the direction of Touchstone Small i.e., Touchstone Small and Western Asset go up and down completely randomly.
Pair Corralation between Touchstone Small and Western Asset
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 2.73 times more return on investment than Western Asset. However, Touchstone Small is 2.73 times more volatile than Western Asset Smash. It trades about 0.09 of its potential returns per unit of risk. Western Asset Smash is currently generating about 0.04 per unit of risk. If you would invest 3,185 in Touchstone Small Cap on September 14, 2024 and sell it today you would earn a total of 879.00 from holding Touchstone Small Cap or generate 27.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Small Cap vs. Western Asset Smash
Performance |
| Timeline |
| Touchstone Small Cap |
| Western Asset Smash |
Touchstone Small and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and Western Asset
The main advantage of trading using opposite Touchstone Small and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Touchstone Small vs. Goldman Sachs Clean | Touchstone Small vs. Franklin Gold Precious | Touchstone Small vs. Invesco Gold Special | Touchstone Small vs. Gold And Precious |
| Western Asset vs. Ab Small Cap | Western Asset vs. Scout Small Cap | Western Asset vs. Touchstone Small Cap | Western Asset vs. Df Dent Small |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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