Correlation Between Champlain Small and Diversified Real

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

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

Diversification Opportunities for Champlain Small and Diversified Real

-0.26

Correlation Coefficient

Champlain Small  Diversified Real

Very good diversification

The 3 months correlation between Champlain and Diversified is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Diversified Real Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Real Asset 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 Diversified Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Real Asset has no effect on the direction of Champlain Small i.e., Champlain Small and Diversified Real go up and down completely randomly.

Pair Corralation between Champlain Small and Diversified Real

Assuming the 90 days horizon Champlain Small is expected to generate 2.75 times more return on investment than Diversified Real. However, Champlain Small is 2.75 times more volatile than Diversified Real Asset. It trades about 0.18 of its potential returns per unit of risk. Diversified Real Asset is currently generating about 0.0 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Champlain Small  vs.  Diversified Real Asset

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.

Diversified Real Asset

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diversified Real Asset has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Diversified Real 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 Diversified Real

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

The idea behind Champlain Small and Diversified Real Asset 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.