Correlation Between Global Hard and Champlain Small

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

By analyzing existing cross correlation between Global Hard Assets and Champlain Small, you can compare the effects of market volatilities on Global Hard and Champlain 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 Global Hard with a short position of Champlain Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Hard and Champlain Small.

Diversification Opportunities for Global Hard and Champlain Small

-0.09

Correlation Coefficient

Global Hard  Champlain Small

Good diversification

The 3 months correlation between Global and Champlain is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Global Hard Assets and Champlain Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Small and Global Hard 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 Global Hard Assets are associated (or correlated) with Champlain Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champlain Small has no effect on the direction of Global Hard i.e., Global Hard and Champlain Small go up and down completely randomly.

Pair Corralation between Global Hard and Champlain Small

Assuming the 90 days horizon Global Hard is expected to generate 6.33 times less return on investment than Champlain Small. But when comparing it to its historical volatility, Global Hard Assets is 1.41 times less risky than Champlain Small. It trades about 0.04 of its potential returns per unit of risk. Champlain Small is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,285  in Champlain Small on September 14, 2024 and sell it today you would earn a total of  283.00  from holding Champlain Small or generate 12.39% return on investment over 90 days.

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

Global Hard Assets  vs.  Champlain Small

Global Hard Assets

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Hard Assets are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Hard is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Champlain Small

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Champlain Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global Hard and Champlain Small

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

The idea behind Global Hard Assets and Champlain Small 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 Transaction History module to view history of all your transactions and understand their impact on performance.