Correlation Between Touchstone Small and Active Bond
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Active Bond 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 Active Bond 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 Active Bond Fund, you can compare the effects of market volatilities on Touchstone Small and Active Bond 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 Active Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Active Bond.
Diversification Opportunities for Touchstone Small and Active Bond
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Touchstone and Active is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Active Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active Bond Fund 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 Active Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active Bond Fund has no effect on the direction of Touchstone Small i.e., Touchstone Small and Active Bond go up and down completely randomly.
Pair Corralation between Touchstone Small and Active Bond
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 4.87 times more return on investment than Active Bond. However, Touchstone Small is 4.87 times more volatile than Active Bond Fund. It trades about 0.26 of its potential returns per unit of risk. Active Bond Fund is currently generating about 0.12 per unit of risk. If you would invest 3,824 in Touchstone Small Cap on September 5, 2024 and sell it today you would earn a total of 331.00 from holding Touchstone Small Cap or generate 8.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Touchstone Small Cap vs. Active Bond Fund
Performance |
| Timeline |
| Touchstone Small Cap |
| Active Bond Fund |
Touchstone Small and Active Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and Active Bond
The main advantage of trading using opposite Touchstone Small and Active Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Active Bond 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 Active Bond will offset losses from the drop in Active Bond's long position.| Touchstone Small vs. Heartland Value Plus | Touchstone Small vs. Queens Road Small | Touchstone Small vs. Hennessy Nerstone Mid | Touchstone Small vs. Amg River Road |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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