Correlation Between Champlain Small and Congress Large

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

By analyzing existing cross correlation between Champlain Small and Congress Large Cap, you can compare the effects of market volatilities on Champlain Small and Congress Large 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 Congress Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champlain Small and Congress Large.

Diversification Opportunities for Champlain Small and Congress Large

0.9

Correlation Coefficient

Champlain Small  Congress Large

Almost no diversification

The 3 months correlation between Champlain and Congress is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Congress Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Congress Large 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 Congress Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Congress Large Cap has no effect on the direction of Champlain Small i.e., Champlain Small and Congress Large go up and down completely randomly.

Pair Corralation between Champlain Small and Congress Large

Assuming the 90 days horizon Champlain Small is expected to generate 1.48 times more return on investment than Congress Large. However, Champlain Small is 1.48 times more volatile than Congress Large Cap. It trades about 0.19 of its potential returns per unit of risk. Congress Large Cap is currently generating about 0.23 per unit of risk. If you would invest  2,219  in Champlain Small on September 10, 2024 and sell it today you would earn a total of  338.00  from holding Champlain Small or generate 15.23% 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.  Congress Large Cap

Champlain Small

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 15 (%) 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.

Congress Large Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Congress Large Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Congress Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Champlain Small and Congress Large

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

The idea behind Champlain Small and Congress Large 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 Transaction History module to view history of all your transactions and understand their impact on performance.