Correlation Between Touchstone Small and Touchstone Large
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Touchstone 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 Touchstone 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 Touchstone Large Cap, you can compare the effects of market volatilities on Touchstone Small and Touchstone 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 Touchstone Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Touchstone Large.
Diversification Opportunities for Touchstone Small and Touchstone Large
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Touchstone and Touchstone is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Touchstone Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone 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 Touchstone Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Large Cap has no effect on the direction of Touchstone Small i.e., Touchstone Small and Touchstone Large go up and down completely randomly.
Pair Corralation between Touchstone Small and Touchstone Large
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 1.51 times more return on investment than Touchstone Large. However, Touchstone Small is 1.51 times more volatile than Touchstone Large Cap. It trades about 0.19 of its potential returns per unit of risk. Touchstone Large Cap is currently generating about 0.06 per unit of risk. If you would invest 3,850 in Touchstone Small Cap on October 25, 2024 and sell it today you would earn a total of 125.00 from holding Touchstone Small Cap or generate 3.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Touchstone Small Cap vs. Touchstone Large Cap
Performance |
| Timeline |
| Touchstone Small Cap |
| Touchstone Large Cap |
Touchstone Small and Touchstone Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and Touchstone Large
The main advantage of trading using opposite Touchstone Small and Touchstone Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Touchstone 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 Touchstone Large will offset losses from the drop in Touchstone Large's long position.| Touchstone Small vs. Deutsche Gold Precious | Touchstone Small vs. James Balanced Golden | Touchstone Small vs. Sprott Gold Equity | Touchstone Small vs. First Eagle Gold |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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