Correlation Between World Energy and Carillon Chartwell

Can any of the company-specific risk be diversified away by investing in both World Energy and Carillon Chartwell 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 World Energy and Carillon Chartwell into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between World Energy Fund and Carillon Chartwell Small, you can compare the effects of market volatilities on World Energy and Carillon Chartwell 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 World Energy with a short position of Carillon Chartwell. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Carillon Chartwell.

Diversification Opportunities for World Energy and Carillon Chartwell

0.84

Correlation Coefficient

World Energy  Carillon Chartwell

Very poor diversification

The 3 months correlation between World and Carillon is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Carillon Chartwell Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carillon Chartwell Small and World Energy 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 World Energy Fund are associated (or correlated) with Carillon Chartwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carillon Chartwell Small has no effect on the direction of World Energy i.e., World Energy and Carillon Chartwell go up and down completely randomly.

Pair Corralation between World Energy and Carillon Chartwell

Assuming the 90 days horizon World Energy is expected to generate 1.73 times less return on investment than Carillon Chartwell. But when comparing it to its historical volatility, World Energy Fund is 1.24 times less risky than Carillon Chartwell. It trades about 0.04 of its potential returns per unit of risk. Carillon Chartwell Small is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,484  in Carillon Chartwell Small on October 4, 2024 and sell it today you would earn a total of  197.00  from holding Carillon Chartwell Small or generate 13.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	46.38%
Values	Daily Returns

World Energy Fund  vs.  Carillon Chartwell Small

World Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in World Energy Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, World Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Carillon Chartwell Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carillon Chartwell Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Carillon Chartwell is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with World Energy and Carillon Chartwell

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

The idea behind World Energy Fund and Carillon Chartwell Small 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.