Correlation Between Touchstone Small and American Funds
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and American Funds 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 American Funds 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 American Funds 2025, you can compare the effects of market volatilities on Touchstone Small and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and American Funds.
Diversification Opportunities for Touchstone Small and American Funds
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Touchstone and American is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and American Funds 2025 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2025 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2025 has no effect on the direction of Touchstone Small i.e., Touchstone Small and American Funds go up and down completely randomly.
Pair Corralation between Touchstone Small and American Funds
Assuming the 90 days horizon Touchstone Small Cap is expected to under-perform the American Funds. In addition to that, Touchstone Small is 1.69 times more volatile than American Funds 2025. It trades about -0.06 of its total potential returns per unit of risk. American Funds 2025 is currently generating about -0.08 per unit of volatility. If you would invest 1,567 in American Funds 2025 on October 22, 2024 and sell it today you would lose (30.00) from holding American Funds 2025 or give up 1.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Small Cap vs. American Funds 2025
Performance |
| Timeline |
| Touchstone Small Cap |
| American Funds 2025 |
Touchstone Small and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and American Funds
The main advantage of trading using opposite Touchstone Small and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Touchstone Small vs. Prudential Government Money | Touchstone Small vs. Tiaa Cref Life Funds | Touchstone Small vs. North Capital Funds | Touchstone Small vs. State Street Master |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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