Correlation Between Touchstone Mid and Paradigm Select

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

Diversification Opportunities for Touchstone Mid and Paradigm Select

0.81

Correlation Coefficient

Touchstone Mid  Paradigm Select

Very poor diversification

The 3 months correlation between Touchstone and Paradigm is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Mid Cap and Paradigm Select Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Select 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 Paradigm Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Select has no effect on the direction of Touchstone Mid i.e., Touchstone Mid and Paradigm Select go up and down completely randomly.

Pair Corralation between Touchstone Mid and Paradigm Select

Assuming the 90 days horizon Touchstone Mid Cap is expected to under-perform the Paradigm Select. But the mutual fund apears to be less risky and, when comparing its historical volatility, Touchstone Mid Cap is 1.19 times less risky than Paradigm Select. The mutual fund trades about -0.49 of its potential returns per unit of risk. The Paradigm Select Fund is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  8,553  in Paradigm Select Fund on September 24, 2024 and sell it today you would lose (428.00) from holding Paradigm Select Fund or give up 5.0% of portfolio value over 90 days.

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

Touchstone Mid Cap  vs.  Paradigm Select Fund

Touchstone Mid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Touchstone Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Paradigm Select

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paradigm Select Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Paradigm Select 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 Paradigm Select

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

The idea behind Touchstone Mid Cap and Paradigm Select 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.