Correlation Between Touchstone International and Davenport

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

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

Diversification Opportunities for Touchstone International and Davenport

-0.38

Correlation Coefficient

Touchstone International  Davenport

Very good diversification

The 3 months correlation between Touchstone and Davenport is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone International Equit and Davenport E Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davenport E Fund and Touchstone International 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 International Equity are associated (or correlated) with Davenport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davenport E Fund has no effect on the direction of Touchstone International i.e., Touchstone International and Davenport go up and down completely randomly.

Pair Corralation between Touchstone International and Davenport

Assuming the 90 days horizon Touchstone International Equity is expected to under-perform the Davenport. In addition to that, Touchstone International is 1.15 times more volatile than Davenport E Fund. It trades about -0.04 of its total potential returns per unit of risk. Davenport E Fund is currently generating about 0.07 per unit of volatility. If you would invest  3,471  in Davenport E Fund on September 13, 2024 and sell it today you would earn a total of  282.00  from holding Davenport E Fund or generate 8.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.32%
Values	Daily Returns

Touchstone International Equit  vs.  Davenport E Fund

Touchstone International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Davenport E Fund

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Davenport E Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Davenport 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 International and Davenport

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

The idea behind Touchstone International Equity and Davenport E 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.