Correlation Between Touchstone Ohio and Financial Industries

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

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

Diversification Opportunities for Touchstone Ohio and Financial Industries

-0.41

Correlation Coefficient

Touchstone Ohio  Financial Industries

Very good diversification

The 3 months correlation between Touchstone and Financial is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Ohio Tax and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries and Touchstone Ohio 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 Ohio Tax are associated (or correlated) with Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Touchstone Ohio i.e., Touchstone Ohio and Financial Industries go up and down completely randomly.

Pair Corralation between Touchstone Ohio and Financial Industries

Assuming the 90 days horizon Touchstone Ohio is expected to generate 29.94 times less return on investment than Financial Industries. But when comparing it to its historical volatility, Touchstone Ohio Tax is 6.43 times less risky than Financial Industries. It trades about 0.04 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,805  in Financial Industries Fund on August 31, 2024 and sell it today you would earn a total of  322.00  from holding Financial Industries Fund or generate 17.84% return on investment over 90 days.

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

Touchstone Ohio Tax  vs.  Financial Industries Fund

Touchstone Ohio Tax

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Ohio Tax are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Touchstone Ohio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Financial Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Industries Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Financial Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Touchstone Ohio and Financial Industries

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

The idea behind Touchstone Ohio Tax and Financial Industries 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.