Correlation Between Touchstone Large and Moderately Conservative

Can any of the company-specific risk be diversified away by investing in both Touchstone Large and Moderately Conservative 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 Moderately Conservative 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 Moderately Servative Balanced, you can compare the effects of market volatilities on Touchstone Large and Moderately Conservative 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 Moderately Conservative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Touchstone Large and Moderately Conservative.

Diversification Opportunities for Touchstone Large and Moderately Conservative

0.92

Correlation Coefficient

Touchstone Large  Moderately Conservative

Almost no diversification

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

Pair Corralation between Touchstone Large and Moderately Conservative

Assuming the 90 days horizon Touchstone Large Cap is expected to generate 1.38 times more return on investment than Moderately Conservative. However, Touchstone Large is 1.38 times more volatile than Moderately Servative Balanced. It trades about 0.18 of its potential returns per unit of risk. Moderately Servative Balanced is currently generating about 0.21 per unit of risk. If you would invest  1,917  in Touchstone Large Cap on September 4, 2024 and sell it today you would earn a total of  146.00  from holding Touchstone Large Cap or generate 7.62% return on investment over 90 days.

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

Touchstone Large Cap  vs.  Moderately Servative Balanced

Touchstone Large Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Large Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Touchstone Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Moderately Conservative

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Moderately Servative Balanced are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Moderately Conservative 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 Moderately Conservative

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

The idea behind Touchstone Large Cap and Moderately Servative Balanced 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.