Correlation Between Champlain Small and Baird Small/mid

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

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

Diversification Opportunities for Champlain Small and Baird Small/mid

0.94

Correlation Coefficient

Champlain Small  Baird Small/mid

Almost no diversification

The 3 months correlation between Champlain and Baird is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Baird Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Smallmid Cap and Champlain Small 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 Small are associated (or correlated) with Baird Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Smallmid Cap has no effect on the direction of Champlain Small i.e., Champlain Small and Baird Small/mid go up and down completely randomly.

Pair Corralation between Champlain Small and Baird Small/mid

Assuming the 90 days horizon Champlain Small is expected to generate 1.07 times more return on investment than Baird Small/mid. However, Champlain Small is 1.07 times more volatile than Baird Smallmid Cap. It trades about 0.05 of its potential returns per unit of risk. Baird Smallmid Cap is currently generating about 0.04 per unit of risk. If you would invest  2,036  in Champlain Small on August 31, 2024 and sell it today you would earn a total of  514.00  from holding Champlain Small or generate 25.25% return on investment over 90 days.

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

Champlain Small  vs.  Baird Smallmid Cap

Champlain Small

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Champlain Small showed solid returns over the last few months and may actually be approaching a breakup point.

Baird Smallmid Cap

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Baird Smallmid Cap are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Baird Small/mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Champlain Small and Baird Small/mid

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

The idea behind Champlain Small and Baird Smallmid 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.