Correlation Between Western Asset and Touchstone International
Can any of the company-specific risk be diversified away by investing in both Western Asset and Touchstone International 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 Western Asset and Touchstone International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Diversified and Touchstone International Equity, you can compare the effects of market volatilities on Western Asset and Touchstone International 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 Western Asset with a short position of Touchstone International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Touchstone International.
Diversification Opportunities for Western Asset and Touchstone International
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Touchstone is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Touchstone International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone International and Western Asset 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 Western Asset Diversified are associated (or correlated) with Touchstone International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone International has no effect on the direction of Western Asset i.e., Western Asset and Touchstone International go up and down completely randomly.
Pair Corralation between Western Asset and Touchstone International
Assuming the 90 days horizon Western Asset Diversified is expected to generate 0.31 times more return on investment than Touchstone International. However, Western Asset Diversified is 3.19 times less risky than Touchstone International. It trades about -0.03 of its potential returns per unit of risk. Touchstone International Equity is currently generating about -0.23 per unit of risk. If you would invest 1,540 in Western Asset Diversified on August 27, 2024 and sell it today you would lose (3.00) from holding Western Asset Diversified or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Diversified vs. Touchstone International Equit
Performance |
| Timeline |
| Western Asset Diversified |
| Touchstone International |
Western Asset and Touchstone International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Touchstone International
The main advantage of trading using opposite Western Asset and Touchstone International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Touchstone International 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 International will offset losses from the drop in Touchstone International's long position.| Western Asset vs. Ab All Market | Western Asset vs. Pnc Emerging Markets | Western Asset vs. T Rowe Price | Western Asset vs. Shelton Emerging Markets |
| Touchstone International vs. Touchstone Small Cap | Touchstone International vs. Touchstone Sands Capital | Touchstone International vs. Mid Cap Growth | Touchstone International 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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