Correlation Between Smallcap World and Touchstone International

Can any of the company-specific risk be diversified away by investing in both Smallcap World 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 Smallcap World and Touchstone International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Smallcap World Fund and Touchstone International Equity, you can compare the effects of market volatilities on Smallcap World 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 Smallcap World with a short position of Touchstone International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Touchstone International.

Diversification Opportunities for Smallcap World and Touchstone International

0.97

Correlation Coefficient

Smallcap World  Touchstone International

Almost no diversification

The 3 months correlation between Smallcap and Touchstone is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Touchstone International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone International and Smallcap World 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 Smallcap World Fund 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 Smallcap World i.e., Smallcap World and Touchstone International go up and down completely randomly.

Pair Corralation between Smallcap World and Touchstone International

Assuming the 90 days horizon Smallcap World Fund is expected to generate 1.11 times more return on investment than Touchstone International. However, Smallcap World is 1.11 times more volatile than Touchstone International Equity. It trades about 0.28 of its potential returns per unit of risk. Touchstone International Equity is currently generating about 0.26 per unit of risk. If you would invest  6,479  in Smallcap World Fund on April 30, 2025 and sell it today you would earn a total of  926.00  from holding Smallcap World Fund or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Smallcap World Fund  vs.  Touchstone International Equit

Smallcap World

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Smallcap World showed solid returns over the last few months and may actually be approaching a breakup point.

Touchstone International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone International Equity are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Touchstone International may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Smallcap World and Touchstone International

The main advantage of trading using opposite Smallcap World and Touchstone International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World 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.

The idea behind Smallcap World Fund and Touchstone International Equity 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.