Correlation Between Champlain Small and The Hartford

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

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

Diversification Opportunities for Champlain Small and The Hartford

0.82

Correlation Coefficient

Champlain Small  The Hartford

Very poor diversification

The 3 months correlation between Champlain and The is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small Pany and The Hartford Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Midcap 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 Pany are associated (or correlated) with The Hartford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Midcap has no effect on the direction of Champlain Small i.e., Champlain Small and The Hartford go up and down completely randomly.

Pair Corralation between Champlain Small and The Hartford

Assuming the 90 days horizon Champlain Small Pany is expected to generate 1.59 times more return on investment than The Hartford. However, Champlain Small is 1.59 times more volatile than The Hartford Midcap. It trades about -0.21 of its potential returns per unit of risk. The Hartford Midcap is currently generating about -0.35 per unit of risk. If you would invest  2,472  in Champlain Small Pany on October 6, 2024 and sell it today you would lose (268.00) from holding Champlain Small Pany or give up 10.84% of portfolio value over 90 days.

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

Champlain Small Pany  vs.  The Hartford Midcap

Champlain Small Pany

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small Pany 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.

Hartford Midcap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Hartford Midcap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, The Hartford 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 The Hartford

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

The idea behind Champlain Small Pany and The Hartford Midcap 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.