Correlation Between Touchstone Small and Long-term
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Long-term 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 Long-term 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 Long Term Government Fund, you can compare the effects of market volatilities on Touchstone Small and Long-term 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 Long-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Long-term.
Diversification Opportunities for Touchstone Small and Long-term
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Touchstone and Long-term is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Long Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Term Government 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 Long-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Term Government has no effect on the direction of Touchstone Small i.e., Touchstone Small and Long-term go up and down completely randomly.
Pair Corralation between Touchstone Small and Long-term
Assuming the 90 days horizon Touchstone Small is expected to generate 7.72 times less return on investment than Long-term. But when comparing it to its historical volatility, Touchstone Small Cap is 12.54 times less risky than Long-term. It trades about 0.05 of its potential returns per unit of risk. Long Term Government Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,506 in Long Term Government Fund on September 3, 2024 and sell it today you would lose (56.00) from holding Long Term Government Fund or give up 3.72% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Small Cap vs. Long Term Government Fund
Performance |
| Timeline |
| Touchstone Small Cap |
| Long Term Government |
Touchstone Small and Long-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and Long-term
The main advantage of trading using opposite Touchstone Small and Long-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Long-term 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 Long-term will offset losses from the drop in Long-term'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 |
| Long-term vs. Ab Small Cap | Long-term vs. Chartwell Small Cap | Long-term vs. Baird Smallmid Cap | Long-term 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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