Correlation Between Rational Strategic and Touchstone Small

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

By analyzing existing cross correlation between Rational Strategic Allocation and Touchstone Small Cap, you can compare the effects of market volatilities on Rational Strategic and Touchstone Small 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 Rational Strategic with a short position of Touchstone Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Strategic and Touchstone Small.

Diversification Opportunities for Rational Strategic and Touchstone Small

0.79

Correlation Coefficient

Rational Strategic  Touchstone Small

Poor diversification

The 3 months correlation between Rational and Touchstone is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Rational Strategic Allocation and Touchstone Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Small Cap and Rational Strategic 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 Rational Strategic Allocation are associated (or correlated) with Touchstone Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Small Cap has no effect on the direction of Rational Strategic i.e., Rational Strategic and Touchstone Small go up and down completely randomly.

Pair Corralation between Rational Strategic and Touchstone Small

Assuming the 90 days horizon Rational Strategic Allocation is expected to generate 1.18 times more return on investment than Touchstone Small. However, Rational Strategic is 1.18 times more volatile than Touchstone Small Cap. It trades about 0.07 of its potential returns per unit of risk. Touchstone Small Cap is currently generating about 0.08 per unit of risk. If you would invest  679.00  in Rational Strategic Allocation on August 31, 2024 and sell it today you would earn a total of  267.00  from holding Rational Strategic Allocation or generate 39.32% return on investment over 90 days.

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

Rational Strategic Allocation  vs.  Touchstone Small Cap

Rational Strategic

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Strategic Allocation are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rational Strategic may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Touchstone Small Cap

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady basic indicators, Touchstone Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Rational Strategic and Touchstone Small

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

The idea behind Rational Strategic Allocation and Touchstone Small Cap 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.