Correlation Between Touchstone Large and Aquila Tax

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

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

Diversification Opportunities for Touchstone Large and Aquila Tax

-0.05

Correlation Coefficient

Touchstone Large  Aquila Tax

Good diversification

The 3 months correlation between Touchstone and Aquila is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Large Cap and Aquila Tax Free Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Tax Free and Touchstone Large 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 Large Cap are associated (or correlated) with Aquila Tax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Tax Free has no effect on the direction of Touchstone Large i.e., Touchstone Large and Aquila Tax go up and down completely randomly.

Pair Corralation between Touchstone Large and Aquila Tax

Assuming the 90 days horizon Touchstone Large Cap is expected to generate 4.08 times more return on investment than Aquila Tax. However, Touchstone Large is 4.08 times more volatile than Aquila Tax Free Fund. It trades about 0.08 of its potential returns per unit of risk. Aquila Tax Free Fund is currently generating about 0.08 per unit of risk. If you would invest  1,820  in Touchstone Large Cap on September 13, 2024 and sell it today you would earn a total of  141.00  from holding Touchstone Large Cap or generate 7.75% return on investment over 90 days.

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

Touchstone Large Cap  vs.  Aquila Tax Free Fund

Touchstone Large Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Large Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Touchstone Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aquila Tax Free

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aquila Tax Free Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Aquila Tax 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 Large and Aquila Tax

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

The idea behind Touchstone Large Cap and Aquila Tax Free 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.