Correlation Between Champlain Mid and Rational Defensive

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

Diversification Opportunities for Champlain Mid and Rational Defensive

0.13

Correlation Coefficient

Champlain Mid  Rational Defensive

Average diversification

The 3 months correlation between Champlain and Rational is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Mid Cap and Rational Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Defensive Growth 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 Rational Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Defensive Growth has no effect on the direction of Champlain Mid i.e., Champlain Mid and Rational Defensive go up and down completely randomly.

Pair Corralation between Champlain Mid and Rational Defensive

Assuming the 90 days horizon Champlain Mid Cap is expected to under-perform the Rational Defensive. In addition to that, Champlain Mid is 1.61 times more volatile than Rational Defensive Growth. It trades about -0.14 of its total potential returns per unit of risk. Rational Defensive Growth is currently generating about 0.0 per unit of volatility. If you would invest  4,042  in Rational Defensive Growth on November 29, 2024 and sell it today you would lose (21.00) from holding Rational Defensive Growth or give up 0.52% of portfolio value over 90 days.

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

Champlain Mid Cap  vs.  Rational Defensive Growth

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 weak performance in the last few months, the Fund's primary indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Rational Defensive Growth

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Champlain Mid Cap and Rational Defensive Growth 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.