Correlation Between Champlain Small and Dreyfus Technology

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

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

Diversification Opportunities for Champlain Small and Dreyfus Technology

0.46

Correlation Coefficient

Champlain Small  Dreyfus Technology

Very weak diversification

The 3 months correlation between Champlain and Dreyfus is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Dreyfus Technology Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dreyfus Technology Growth 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 Dreyfus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dreyfus Technology Growth has no effect on the direction of Champlain Small i.e., Champlain Small and Dreyfus Technology go up and down completely randomly.

Pair Corralation between Champlain Small and Dreyfus Technology

Assuming the 90 days horizon Champlain Small is expected to generate 0.61 times more return on investment than Dreyfus Technology. However, Champlain Small is 1.64 times less risky than Dreyfus Technology. It trades about -0.1 of its potential returns per unit of risk. Dreyfus Technology Growth is currently generating about -0.07 per unit of risk. If you would invest  2,273  in Champlain Small on December 22, 2024 and sell it today you would lose (151.00) from holding Champlain Small or give up 6.64% of portfolio value over 90 days.

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

Champlain Small  vs.  Dreyfus Technology Growth

Champlain Small

Risk-Adjusted Performance

Very Weak

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

Dreyfus Technology Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dreyfus Technology Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Small and Dreyfus Technology

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

The idea behind Champlain Small and Dreyfus Technology 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.