Correlation Between Carillon Chartwell and Scout Small

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

By analyzing existing cross correlation between Carillon Chartwell Short and Scout Small Cap, you can compare the effects of market volatilities on Carillon Chartwell and Scout Small 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 Carillon Chartwell with a short position of Scout Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carillon Chartwell and Scout Small.

Diversification Opportunities for Carillon Chartwell and Scout Small

0.72

Correlation Coefficient

Carillon Chartwell  Scout Small

Poor diversification

The 3 months correlation between Carillon and Scout is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Carillon Chartwell Short and Scout Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scout Small Cap and Carillon Chartwell 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 Carillon Chartwell Short are associated (or correlated) with Scout Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scout Small Cap has no effect on the direction of Carillon Chartwell i.e., Carillon Chartwell and Scout Small go up and down completely randomly.

Pair Corralation between Carillon Chartwell and Scout Small

Assuming the 90 days horizon Carillon Chartwell is expected to generate 15.33 times less return on investment than Scout Small. But when comparing it to its historical volatility, Carillon Chartwell Short is 14.02 times less risky than Scout Small. It trades about 0.14 of its potential returns per unit of risk. Scout Small Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,071  in Scout Small Cap on September 2, 2024 and sell it today you would earn a total of  405.00  from holding Scout Small Cap or generate 13.19% return on investment over 90 days.

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

Carillon Chartwell Short  vs.  Scout Small Cap

Carillon Chartwell Short

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carillon Chartwell Short are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Carillon Chartwell is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Scout Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scout Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Scout Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carillon Chartwell and Scout Small

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

The idea behind Carillon Chartwell Short and Scout Small Cap 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.