Correlation Between Vanguard Emerging and Touchstone Sands
Can any of the company-specific risk be diversified away by investing in both Vanguard Emerging and Touchstone Sands 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 Vanguard Emerging and Touchstone Sands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Emerging Markets and Touchstone Sands Capital, you can compare the effects of market volatilities on Vanguard Emerging and Touchstone Sands 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 Vanguard Emerging with a short position of Touchstone Sands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Emerging and Touchstone Sands.
Diversification Opportunities for Vanguard Emerging and Touchstone Sands
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and Touchstone is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Emerging Markets and Touchstone Sands Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Sands Capital and Vanguard Emerging 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 Vanguard Emerging Markets are associated (or correlated) with Touchstone Sands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Sands Capital has no effect on the direction of Vanguard Emerging i.e., Vanguard Emerging and Touchstone Sands go up and down completely randomly.
Pair Corralation between Vanguard Emerging and Touchstone Sands
Assuming the 90 days horizon Vanguard Emerging Markets is expected to under-perform the Touchstone Sands. But the mutual fund apears to be less risky and, when comparing its historical volatility, Vanguard Emerging Markets is 1.78 times less risky than Touchstone Sands. The mutual fund trades about -0.44 of its potential returns per unit of risk. The Touchstone Sands Capital is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest 1,440 in Touchstone Sands Capital on October 9, 2024 and sell it today you would lose (58.00) from holding Touchstone Sands Capital or give up 4.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Emerging Markets vs. Touchstone Sands Capital
Performance |
| Timeline |
| Vanguard Emerging Markets |
| Touchstone Sands Capital |
Vanguard Emerging and Touchstone Sands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Emerging and Touchstone Sands
The main advantage of trading using opposite Vanguard Emerging and Touchstone Sands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Emerging position performs unexpectedly, Touchstone Sands 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 Sands will offset losses from the drop in Touchstone Sands' long position.The idea behind Vanguard Emerging Markets and Touchstone Sands Capital pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Touchstone Sands vs. Touchstone Small Cap | Touchstone Sands vs. Mid Cap Growth | Touchstone Sands vs. Mid Cap Growth | Touchstone Sands vs. Mid Cap Growth |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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