Correlation Between Champlain Small and Hartford Midcap

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

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

Diversification Opportunities for Champlain Small and Hartford Midcap

0.85

Correlation Coefficient

Champlain Small  Hartford Midcap

Very poor diversification

The 3 months correlation between Champlain and Hartford is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and The Hartford Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Midcap and Champlain Small 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 Champlain Small are associated (or correlated) with Hartford Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Midcap has no effect on the direction of Champlain Small i.e., Champlain Small and Hartford Midcap go up and down completely randomly.

Pair Corralation between Champlain Small and Hartford Midcap

Assuming the 90 days horizon Champlain Small is expected to generate 1.09 times more return on investment than Hartford Midcap. However, Champlain Small is 1.09 times more volatile than The Hartford Midcap. It trades about 0.15 of its potential returns per unit of risk. The Hartford Midcap is currently generating about 0.04 per unit of risk. If you would invest  2,296  in Champlain Small on September 17, 2024 and sell it today you would earn a total of  255.00  from holding Champlain Small or generate 11.11% return on investment over 90 days.

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

Champlain Small  vs.  The Hartford Midcap

Champlain Small

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Champlain Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hartford Midcap

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Champlain Small and Hartford Midcap

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

The idea behind Champlain Small and The Hartford Midcap 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.