Correlation Between Touchstone Small and Touchstone Flexible

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

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

Diversification Opportunities for Touchstone Small and Touchstone Flexible

0.61

Correlation Coefficient

Touchstone Small  Touchstone Flexible

Poor diversification

The 3 months correlation between Touchstone and Touchstone is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Small Pany and Touchstone Flexible Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Flexible and Touchstone Small 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 Touchstone Small Pany are associated (or correlated) with Touchstone Flexible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Flexible has no effect on the direction of Touchstone Small i.e., Touchstone Small and Touchstone Flexible go up and down completely randomly.

Pair Corralation between Touchstone Small and Touchstone Flexible

Assuming the 90 days horizon Touchstone Small Pany is expected to generate 6.36 times more return on investment than Touchstone Flexible. However, Touchstone Small is 6.36 times more volatile than Touchstone Flexible Income. It trades about 0.12 of its potential returns per unit of risk. Touchstone Flexible Income is currently generating about 0.27 per unit of risk. If you would invest  668.00  in Touchstone Small Pany on June 22, 2024 and sell it today you would earn a total of  60.00  from holding Touchstone Small Pany or generate 8.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Touchstone Small Pany  vs.  Touchstone Flexible Income

Touchstone Small Pany

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Small Pany are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Touchstone Small may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Touchstone Flexible

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Flexible Income are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Touchstone Flexible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Touchstone Small and Touchstone Flexible

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

The idea behind Touchstone Small Pany and Touchstone Flexible Income 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.