Correlation Between Champlain Small and Rational Strategic

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

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

Diversification Opportunities for Champlain Small and Rational Strategic

0.8

Correlation Coefficient

Champlain Small  Rational Strategic

Very poor diversification

The 3 months correlation between Champlain and Rational is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Rational Strategic Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Strategic 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 Rational Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Strategic has no effect on the direction of Champlain Small i.e., Champlain Small and Rational Strategic go up and down completely randomly.

Pair Corralation between Champlain Small and Rational Strategic

Assuming the 90 days horizon Champlain Small is expected to generate 1.08 times more return on investment than Rational Strategic. However, Champlain Small is 1.08 times more volatile than Rational Strategic Allocation. It trades about 0.01 of its potential returns per unit of risk. Rational Strategic Allocation is currently generating about -0.05 per unit of risk. If you would invest  2,277  in Champlain Small on October 22, 2024 and sell it today you would earn a total of  11.00  from holding Champlain Small or generate 0.48% return on investment over 90 days.

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

Champlain Small  vs.  Rational Strategic Allocation

Champlain Small

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Champlain Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rational Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rational Strategic Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Rational Strategic 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 Small and Rational Strategic

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

The idea behind Champlain Small and Rational Strategic Allocation 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.