Correlation Between NYSE Composite and Touchstone Funds

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

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

Diversification Opportunities for NYSE Composite and Touchstone Funds

-0.23

Correlation Coefficient

NYSE Composite  Touchstone Funds

Very good diversification

The 3 months correlation between NYSE and Touchstone is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Touchstone Funds Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Funds and NYSE Composite 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 NYSE Composite are associated (or correlated) with Touchstone Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Funds has no effect on the direction of NYSE Composite i.e., NYSE Composite and Touchstone Funds go up and down completely randomly.

Pair Corralation between NYSE Composite and Touchstone Funds

Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Touchstone Funds. In addition to that, NYSE Composite is 2.21 times more volatile than Touchstone Funds Group. It trades about -0.25 of its total potential returns per unit of risk. Touchstone Funds Group is currently generating about -0.01 per unit of volatility. If you would invest  896.00  in Touchstone Funds Group on September 20, 2024 and sell it today you would lose (1.00) from holding Touchstone Funds Group or give up 0.11% of portfolio value over 90 days.

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

NYSE Composite  vs.  Touchstone Funds Group

Pair Trading with NYSE Composite and Touchstone Funds

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

The idea behind NYSE Composite and Touchstone Funds Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..