Correlation Between Touchstone Small and Steward Large
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Steward Large 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 Steward Large 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 Steward Large Cap, you can compare the effects of market volatilities on Touchstone Small and Steward Large 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 Steward Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Steward Large.
Diversification Opportunities for Touchstone Small and Steward Large
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Touchstone and Steward is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Steward Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Large 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 Steward Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Large Cap has no effect on the direction of Touchstone Small i.e., Touchstone Small and Steward Large go up and down completely randomly.
Pair Corralation between Touchstone Small and Steward Large
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 1.42 times more return on investment than Steward Large. However, Touchstone Small is 1.42 times more volatile than Steward Large Cap. It trades about 0.11 of its potential returns per unit of risk. Steward Large Cap is currently generating about 0.15 per unit of risk. If you would invest 3,092 in Touchstone Small Cap on September 1, 2024 and sell it today you would earn a total of 1,085 from holding Touchstone Small Cap or generate 35.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Touchstone Small Cap vs. Steward Large Cap
Performance |
| Timeline |
| Touchstone Small Cap |
| Steward Large Cap |
Touchstone Small and Steward Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and Steward Large
The main advantage of trading using opposite Touchstone Small and Steward Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Steward Large 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 Steward Large will offset losses from the drop in Steward Large's long position.| Touchstone Small vs. Cutler Equity | Touchstone Small vs. Scharf Fund Retail | Touchstone Small vs. Huber Capital Equity | Touchstone Small vs. Icon Equity Income |
| Steward Large vs. Pnc Emerging Markets | Steward Large vs. Rbc Emerging Markets | Steward Large vs. Siit Emerging Markets | Steward Large vs. Aqr Sustainable Long Short |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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