Correlation Between Principal Lifetime and Touchstone Focused

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

By analyzing existing cross correlation between Principal Lifetime Hybrid and Touchstone Focused Fund, you can compare the effects of market volatilities on Principal Lifetime and Touchstone Focused 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 Principal Lifetime with a short position of Touchstone Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Principal Lifetime and Touchstone Focused.

Diversification Opportunities for Principal Lifetime and Touchstone Focused

0.92

Correlation Coefficient

Principal Lifetime  Touchstone Focused

Almost no diversification

The 3 months correlation between Principal and Touchstone is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Principal Lifetime Hybrid and Touchstone Focused Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Focused and Principal Lifetime 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 Principal Lifetime Hybrid are associated (or correlated) with Touchstone Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Focused has no effect on the direction of Principal Lifetime i.e., Principal Lifetime and Touchstone Focused go up and down completely randomly.

Pair Corralation between Principal Lifetime and Touchstone Focused

Assuming the 90 days horizon Principal Lifetime is expected to generate 1.37 times less return on investment than Touchstone Focused. But when comparing it to its historical volatility, Principal Lifetime Hybrid is 1.06 times less risky than Touchstone Focused. It trades about 0.15 of its potential returns per unit of risk. Touchstone Focused Fund is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,253  in Touchstone Focused Fund on September 12, 2024 and sell it today you would earn a total of  499.00  from holding Touchstone Focused Fund or generate 7.98% return on investment over 90 days.

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

Principal Lifetime Hybrid  vs.  Touchstone Focused Fund

Principal Lifetime Hybrid

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Principal Lifetime Hybrid are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Principal Lifetime is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Touchstone Focused

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Focused Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Touchstone Focused may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Principal Lifetime and Touchstone Focused

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

The idea behind Principal Lifetime Hybrid and Touchstone Focused Fund 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.