Correlation Between Chartwell Small and Forty Portfolio

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

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

Diversification Opportunities for Chartwell Small and Forty Portfolio

0.34

Correlation Coefficient

Chartwell Small  Forty Portfolio

Weak diversification

The 3 months correlation between Chartwell and Forty is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Chartwell Small Cap and Forty Portfolio Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forty Portfolio Inst and Chartwell 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 Chartwell Small Cap are associated (or correlated) with Forty Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forty Portfolio Inst has no effect on the direction of Chartwell Small i.e., Chartwell Small and Forty Portfolio go up and down completely randomly.

Pair Corralation between Chartwell Small and Forty Portfolio

Assuming the 90 days horizon Chartwell Small Cap is expected to under-perform the Forty Portfolio. In addition to that, Chartwell Small is 1.69 times more volatile than Forty Portfolio Institutional. It trades about -0.01 of its total potential returns per unit of risk. Forty Portfolio Institutional is currently generating about 0.1 per unit of volatility. If you would invest  3,540  in Forty Portfolio Institutional on December 2, 2024 and sell it today you would earn a total of  2,194  from holding Forty Portfolio Institutional or generate 61.98% return on investment over 90 days.

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

Chartwell Small Cap  vs.  Forty Portfolio Institutional

Chartwell Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chartwell Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Forty Portfolio Inst

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forty Portfolio Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Forty Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chartwell Small and Forty Portfolio

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

The idea behind Chartwell Small Cap and Forty Portfolio Institutional 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.