Correlation Between Rational Defensive and Champlain Mid

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

By analyzing existing cross correlation between Rational Defensive Growth and Champlain Mid Cap, you can compare the effects of market volatilities on Rational Defensive and Champlain Mid 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 Rational Defensive with a short position of Champlain Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Champlain Mid.

Diversification Opportunities for Rational Defensive and Champlain Mid

0.91

Correlation Coefficient

Rational Defensive  Champlain Mid

Almost no diversification

The 3 months correlation between Rational and Champlain is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Champlain Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Mid Cap and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Champlain Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champlain Mid Cap has no effect on the direction of Rational Defensive i.e., Rational Defensive and Champlain Mid go up and down completely randomly.

Pair Corralation between Rational Defensive and Champlain Mid

Assuming the 90 days horizon Rational Defensive Growth is expected to generate 1.11 times more return on investment than Champlain Mid. However, Rational Defensive is 1.11 times more volatile than Champlain Mid Cap. It trades about 0.24 of its potential returns per unit of risk. Champlain Mid Cap is currently generating about 0.18 per unit of risk. If you would invest  3,530  in Rational Defensive Growth on August 31, 2024 and sell it today you would earn a total of  497.00  from holding Rational Defensive Growth or generate 14.08% return on investment over 90 days.

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

Rational Defensive Growth  vs.  Champlain Mid Cap

Rational Defensive Growth

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rational Defensive showed solid returns over the last few months and may actually be approaching a breakup point.

Champlain Mid Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Mid Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Champlain Mid may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Rational Defensive and Champlain Mid

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

The idea behind Rational Defensive Growth and Champlain Mid Cap 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.