Correlation Between Champlain Mid and Cutler Equity

Can any of the company-specific risk be diversified away by investing in both Champlain Mid and Cutler 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 Mid and Cutler Equity 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 Cutler Equity, you can compare the effects of market volatilities on Champlain Mid and Cutler 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 Mid with a short position of Cutler Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champlain Mid and Cutler Equity.

Diversification Opportunities for Champlain Mid and Cutler Equity

0.79

Correlation Coefficient

Champlain Mid  Cutler Equity

Poor diversification

The 3 months correlation between Champlain and Cutler is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Mid Cap and Cutler Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cutler Equity 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 Cutler Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cutler Equity has no effect on the direction of Champlain Mid i.e., Champlain Mid and Cutler Equity go up and down completely randomly.

Pair Corralation between Champlain Mid and Cutler Equity

Assuming the 90 days horizon Champlain Mid Cap is expected to under-perform the Cutler Equity. In addition to that, Champlain Mid is 1.54 times more volatile than Cutler Equity. It trades about -0.02 of its total potential returns per unit of risk. Cutler Equity is currently generating about 0.03 per unit of volatility. If you would invest  2,559  in Cutler Equity on October 9, 2024 and sell it today you would earn a total of  86.00  from holding Cutler Equity or generate 3.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.46%
Values	Daily Returns

Champlain Mid Cap  vs.  Cutler Equity

Champlain Mid Cap

Risk-Adjusted Performance

0 of 100

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 fairly strong primary indicators, Champlain Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cutler Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Champlain Mid and Cutler Equity

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

The idea behind Champlain Mid Cap and Cutler Equity 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.