Correlation Between Champlain Small and Lazard Equity

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

By analyzing existing cross correlation between Champlain Small and Lazard Equity Centrated, you can compare the effects of market volatilities on Champlain Small and Lazard Equity 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 Lazard Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champlain Small and Lazard Equity.

Diversification Opportunities for Champlain Small and Lazard Equity

0.47

Correlation Coefficient

Champlain Small  Lazard Equity

Very weak diversification

The 3 months correlation between Champlain and Lazard is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Lazard Equity Centrated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lazard Equity Centrated 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 Lazard Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lazard Equity Centrated has no effect on the direction of Champlain Small i.e., Champlain Small and Lazard Equity go up and down completely randomly.

Pair Corralation between Champlain Small and Lazard Equity

Assuming the 90 days horizon Champlain Small is expected to generate 1.25 times more return on investment than Lazard Equity. However, Champlain Small is 1.25 times more volatile than Lazard Equity Centrated. It trades about 0.18 of its potential returns per unit of risk. Lazard Equity Centrated is currently generating about 0.08 per unit of risk. If you would invest  2,241  in Champlain Small on September 12, 2024 and sell it today you would earn a total of  316.00  from holding Champlain Small or generate 14.1% return on investment over 90 days.

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

Champlain Small  vs.  Lazard Equity Centrated

Champlain Small

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Champlain Small showed solid returns over the last few months and may actually be approaching a breakup point.

Lazard Equity Centrated

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lazard Equity Centrated are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Lazard Equity 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 Lazard Equity

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

The idea behind Champlain Small and Lazard Equity Centrated 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.