Correlation Between Touchstone Mid and Touchstone Large

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

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

Diversification Opportunities for Touchstone Mid and Touchstone Large

0.9

Correlation Coefficient

Touchstone Mid  Touchstone Large

Almost no diversification

The 3 months correlation between Touchstone and Touchstone is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Mid Cap and Touchstone Large Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Large Pany and Touchstone Mid 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 Mid Cap are associated (or correlated) with Touchstone Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Large Pany has no effect on the direction of Touchstone Mid i.e., Touchstone Mid and Touchstone Large go up and down completely randomly.

Pair Corralation between Touchstone Mid and Touchstone Large

Assuming the 90 days horizon Touchstone Mid is expected to generate 1.35 times less return on investment than Touchstone Large. But when comparing it to its historical volatility, Touchstone Mid Cap is 1.16 times less risky than Touchstone Large. It trades about 0.07 of its potential returns per unit of risk. Touchstone Large Pany is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,745  in Touchstone Large Pany on September 19, 2024 and sell it today you would earn a total of  2,171  from holding Touchstone Large Pany or generate 57.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.79%
Values	Daily Returns

Touchstone Mid Cap  vs.  Touchstone Large Pany

Touchstone Mid Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Mid Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Touchstone Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Touchstone Large Pany

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Large Pany are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Touchstone Large 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 Mid and Touchstone Large

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

The idea behind Touchstone Mid Cap and Touchstone Large Pany 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 Stocks Directory module to find actively traded stocks across global markets.