Correlation Between Sentinel Mon and Touchstone Mid

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

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

Diversification Opportunities for Sentinel Mon and Touchstone Mid

0.95

Correlation Coefficient

Sentinel Mon  Touchstone Mid

Almost no diversification

The 3 months correlation between Sentinel and Touchstone is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Mon Stock and Touchstone Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Mid Cap and Sentinel Mon 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 Sentinel Mon Stock are associated (or correlated) with Touchstone Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Mid Cap has no effect on the direction of Sentinel Mon i.e., Sentinel Mon and Touchstone Mid go up and down completely randomly.

Pair Corralation between Sentinel Mon and Touchstone Mid

Assuming the 90 days horizon Sentinel Mon Stock is expected to under-perform the Touchstone Mid. In addition to that, Sentinel Mon is 1.11 times more volatile than Touchstone Mid Cap. It trades about -0.02 of its total potential returns per unit of risk. Touchstone Mid Cap is currently generating about 0.0 per unit of volatility. If you would invest  5,349  in Touchstone Mid Cap on February 22, 2025 and sell it today you would lose (72.00) from holding Touchstone Mid Cap or give up 1.35% of portfolio value over 90 days.

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

Sentinel Mon Stock  vs.  Touchstone Mid Cap

Sentinel Mon Stock

Risk-Adjusted Performance

Very Weak

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

Touchstone Mid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sentinel Mon and Touchstone Mid

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

The idea behind Sentinel Mon Stock and Touchstone Mid 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.