Correlation Between Invesco Small and Touchstone Premium

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

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

Diversification Opportunities for Invesco Small and Touchstone Premium

0.84

Correlation Coefficient

Invesco Small  Touchstone Premium

Very poor diversification

The 3 months correlation between Invesco and Touchstone is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Small Cap and Touchstone Premium Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Premium Yield and Invesco 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 Invesco Small Cap are associated (or correlated) with Touchstone Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Premium Yield has no effect on the direction of Invesco Small i.e., Invesco Small and Touchstone Premium go up and down completely randomly.

Pair Corralation between Invesco Small and Touchstone Premium

Assuming the 90 days horizon Invesco Small is expected to generate 1.33 times less return on investment than Touchstone Premium. In addition to that, Invesco Small is 1.28 times more volatile than Touchstone Premium Yield. It trades about 0.04 of its total potential returns per unit of risk. Touchstone Premium Yield is currently generating about 0.06 per unit of volatility. If you would invest  763.00  in Touchstone Premium Yield on May 1, 2025 and sell it today you would earn a total of  173.00  from holding Touchstone Premium Yield or generate 22.67% return on investment over 90 days.

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

Invesco Small Cap  vs.  Touchstone Premium Yield

Invesco Small Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Small Cap are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Small showed solid returns over the last few months and may actually be approaching a breakup point.

Touchstone Premium Yield

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Premium Yield are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Touchstone Premium may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Invesco Small and Touchstone Premium

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

The idea behind Invesco Small Cap and Touchstone Premium Yield 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.