Correlation Between Touchstone International and Rbc China

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

Diversification Opportunities for Touchstone International and Rbc China

0.41

Correlation Coefficient

Touchstone International  Rbc China

Very weak diversification

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

Pair Corralation between Touchstone International and Rbc China

Assuming the 90 days horizon Touchstone International Equity is expected to generate 0.66 times more return on investment than Rbc China. However, Touchstone International Equity is 1.52 times less risky than Rbc China. It trades about 0.11 of its potential returns per unit of risk. Rbc China Equity is currently generating about 0.01 per unit of risk. If you would invest  1,508  in Touchstone International Equity on February 15, 2025 and sell it today you would earn a total of  143.00  from holding Touchstone International Equity or generate 9.48% return on investment over 90 days.

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

Touchstone International Equit  vs.  Rbc China Equity

Touchstone International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone International Equity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Touchstone International may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Rbc China Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rbc China Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Rbc China 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 Rbc China

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

The idea behind Touchstone International Equity and Rbc China Equity 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.