Correlation Between Champlain Mid and Absolute Convertible

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

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

Diversification Opportunities for Champlain Mid and Absolute Convertible

-0.55

Correlation Coefficient

Champlain Mid  Absolute Convertible

Excellent diversification

The 3 months correlation between Champlain and Absolute is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Mid Cap and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible and Champlain Mid 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 Mid Cap are associated (or correlated) with Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of Champlain Mid i.e., Champlain Mid and Absolute Convertible go up and down completely randomly.

Pair Corralation between Champlain Mid and Absolute Convertible

Assuming the 90 days horizon Champlain Mid Cap is expected to under-perform the Absolute Convertible. In addition to that, Champlain Mid is 19.0 times more volatile than Absolute Convertible Arbitrage. It trades about -0.1 of its total potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.68 per unit of volatility. If you would invest  1,117  in Absolute Convertible Arbitrage on December 24, 2024 and sell it today you would earn a total of  24.00  from holding Absolute Convertible Arbitrage or generate 2.15% return on investment over 90 days.

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

Champlain Mid Cap  vs.  Absolute Convertible Arbitrage

Champlain Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Champlain Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Absolute Convertible

Risk-Adjusted Performance

Excellent

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Convertible Arbitrage are ranked lower than 53 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Absolute Convertible 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 Mid and Absolute Convertible

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

The idea behind Champlain Mid Cap and Absolute Convertible Arbitrage 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.