Can any of the company-specific risk be diversified away by investing in both Vanguard Total and Touchstone International 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 Vanguard Total and Touchstone International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Total International and Touchstone International Equity, you can compare the effects of market volatilities on Vanguard Total and Touchstone International 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 Vanguard Total with a short position of Touchstone International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Touchstone International.
Diversification Opportunities for Vanguard Total and Touchstone International
The 3 months correlation between Vanguard and Touchstone is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and Touchstone International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone International and Vanguard Total 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 Vanguard Total International are associated (or correlated) with Touchstone International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone International has no effect on the direction of Vanguard Total i.e., Vanguard Total and Touchstone International go up and down completely randomly.
Pair Corralation between Vanguard Total and Touchstone International
Assuming the 90 days horizon Vanguard Total International is expected to generate 0.98 times more return on investment than Touchstone International. However, Vanguard Total International is 1.02 times less risky than Touchstone International. It trades about 0.05 of its potential returns per unit of risk. Touchstone International Equity is currently generating about 0.05 per unit of risk. If you would invest 1,593 in Vanguard Total International on March 6, 2024 and sell it today you would earn a total of 383.00 from holding Vanguard Total International or generate 24.04% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone International Equity are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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.