Correlation Between Touchstone Small and Extended Market
Can any of the company-specific risk be diversified away by investing in both Touchstone Small and Extended Market 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 Extended Market 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 Extended Market Index, you can compare the effects of market volatilities on Touchstone Small and Extended Market 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 Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Small and Extended Market.
Diversification Opportunities for Touchstone Small and Extended Market
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Touchstone and Extended is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Cap and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index 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 Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Touchstone Small i.e., Touchstone Small and Extended Market go up and down completely randomly.
Pair Corralation between Touchstone Small and Extended Market
Assuming the 90 days horizon Touchstone Small Cap is expected to generate 0.38 times more return on investment than Extended Market. However, Touchstone Small Cap is 2.64 times less risky than Extended Market. It trades about -0.31 of its potential returns per unit of risk. Extended Market Index is currently generating about -0.31 per unit of risk. If you would invest 4,083 in Touchstone Small Cap on October 9, 2024 and sell it today you would lose (252.00) from holding Touchstone Small Cap or give up 6.17% 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. Extended Market Index
Performance |
| Timeline |
| Touchstone Small Cap |
| Extended Market Index |
Touchstone Small and Extended Market Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Touchstone Small and Extended Market
The main advantage of trading using opposite Touchstone Small and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Touchstone Small position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market's long position.| Touchstone Small vs. Dunham Real Estate | Touchstone Small vs. Deutsche Real Estate | Touchstone Small vs. Baron Real Estate | Touchstone Small vs. Tiaa Cref Real Estate |
| Extended Market vs. Gabelli Convertible And | Extended Market vs. Rationalpier 88 Convertible | Extended Market vs. Mainstay Vertible Fund | Extended Market vs. Absolute Convertible Arbitrage |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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