Correlation Between Classic Value and Touchstone Sustainability

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

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

Diversification Opportunities for Classic Value and Touchstone Sustainability

0.42

Correlation Coefficient

Classic Value  Touchstone Sustainability

Very weak diversification

The 3 months correlation between CLASSIC and Touchstone is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Classic Value Fund and Touchstone Sustainability And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Sustainability and Classic Value 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 Classic Value Fund are associated (or correlated) with Touchstone Sustainability. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Sustainability has no effect on the direction of Classic Value i.e., Classic Value and Touchstone Sustainability go up and down completely randomly.

Pair Corralation between Classic Value and Touchstone Sustainability

Assuming the 90 days horizon Classic Value Fund is expected to under-perform the Touchstone Sustainability. In addition to that, Classic Value is 1.06 times more volatile than Touchstone Sustainability And. It trades about -0.12 of its total potential returns per unit of risk. Touchstone Sustainability And is currently generating about -0.05 per unit of volatility. If you would invest  2,610  in Touchstone Sustainability And on January 8, 2025 and sell it today you would lose (120.00) from holding Touchstone Sustainability And or give up 4.6% of portfolio value over 90 days.

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

Classic Value Fund  vs.  Touchstone Sustainability And

Classic Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Classic Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Touchstone Sustainability

Risk-Adjusted Performance

Very Weak

Over the last 90 days Touchstone Sustainability And has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Touchstone Sustainability is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Classic Value and Touchstone Sustainability

The main advantage of trading using opposite Classic Value and Touchstone Sustainability positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Classic Value position performs unexpectedly, Touchstone Sustainability 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 Sustainability will offset losses from the drop in Touchstone Sustainability's long position.

The idea behind Classic Value Fund and Touchstone Sustainability And 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.