Correlation Between Champlain Small and Thrivent Moderate

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

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

Diversification Opportunities for Champlain Small and Thrivent Moderate

0.75

Correlation Coefficient

Champlain Small  Thrivent Moderate

Poor diversification

The 3 months correlation between Champlain and Thrivent is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Thrivent Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thrivent Moderate 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 Thrivent Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thrivent Moderate has no effect on the direction of Champlain Small i.e., Champlain Small and Thrivent Moderate go up and down completely randomly.

Pair Corralation between Champlain Small and Thrivent Moderate

Assuming the 90 days horizon Champlain Small is expected to generate 1.25 times less return on investment than Thrivent Moderate. In addition to that, Champlain Small is 1.62 times more volatile than Thrivent Moderate Allocation. It trades about 0.04 of its total potential returns per unit of risk. Thrivent Moderate Allocation is currently generating about 0.09 per unit of volatility. If you would invest  1,573  in Thrivent Moderate Allocation on October 23, 2024 and sell it today you would earn a total of  14.00  from holding Thrivent Moderate Allocation or generate 0.89% return on investment over 90 days.

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

Champlain Small  vs.  Thrivent Moderate 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.

Thrivent Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Champlain Small and Thrivent Moderate 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.