Correlation Between Touchstone Sands and Touchstone Small

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

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

Diversification Opportunities for Touchstone Sands and Touchstone Small

0.8

Correlation Coefficient

Touchstone Sands  Touchstone Small

Very poor diversification

The 3 months correlation between Touchstone and Touchstone is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Touchstone Sands Capital and Touchstone Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Small Cap and Touchstone Sands 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 Sands Capital are associated (or correlated) with Touchstone Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Small Cap has no effect on the direction of Touchstone Sands i.e., Touchstone Sands and Touchstone Small go up and down completely randomly.

Pair Corralation between Touchstone Sands and Touchstone Small

Assuming the 90 days horizon Touchstone Sands Capital is expected to generate 1.33 times more return on investment than Touchstone Small. However, Touchstone Sands is 1.33 times more volatile than Touchstone Small Cap. It trades about -0.12 of its potential returns per unit of risk. Touchstone Small Cap is currently generating about -0.2 per unit of risk. If you would invest  1,646  in Touchstone Sands Capital on January 19, 2024 and sell it today you would lose (62.00) from holding Touchstone Sands Capital or give up 3.77% of portfolio value over 90 days.

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

Touchstone Sands Capital  vs.  Touchstone Small Cap

Touchstone Sands Capital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Sands Capital are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Touchstone Sands may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Touchstone Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchstone Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Touchstone Small 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 Sands and Touchstone Small

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

The idea behind Touchstone Sands Capital and Touchstone Small Cap 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 Global Correlations module to find global opportunities by holding instruments from different markets.