Correlation Between Champlain Small and Stone Toro

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

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

Diversification Opportunities for Champlain Small and Stone Toro

0.12

Correlation Coefficient

Champlain Small  Stone Toro

Average diversification

The 3 months correlation between Champlain and Stone is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Stone Toro Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Toro Market 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 Stone Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Toro Market has no effect on the direction of Champlain Small i.e., Champlain Small and Stone Toro go up and down completely randomly.

Pair Corralation between Champlain Small and Stone Toro

Assuming the 90 days horizon Champlain Small is expected to under-perform the Stone Toro. In addition to that, Champlain Small is 4.8 times more volatile than Stone Toro Market. It trades about -0.09 of its total potential returns per unit of risk. Stone Toro Market is currently generating about -0.11 per unit of volatility. If you would invest  2,533  in Stone Toro Market on December 30, 2024 and sell it today you would lose (41.00) from holding Stone Toro Market or give up 1.62% of portfolio value over 90 days.

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

Champlain Small  vs.  Stone Toro Market

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.

Stone Toro Market

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Champlain Small and Stone Toro Market 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.