Correlation Between Smallcap Growth and Champlain Mid

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

By analyzing existing cross correlation between Smallcap Growth Fund and Champlain Mid Cap, you can compare the effects of market volatilities on Smallcap Growth and Champlain Mid 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 Smallcap Growth with a short position of Champlain Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Champlain Mid.

Diversification Opportunities for Smallcap Growth and Champlain Mid

0.68

Correlation Coefficient

Smallcap Growth  Champlain Mid

Poor diversification

The 3 months correlation between Smallcap and Champlain is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Champlain Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Mid Cap and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with Champlain Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champlain Mid Cap has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Champlain Mid go up and down completely randomly.

Pair Corralation between Smallcap Growth and Champlain Mid

Assuming the 90 days horizon Smallcap Growth Fund is expected to under-perform the Champlain Mid. But the mutual fund apears to be less risky and, when comparing its historical volatility, Smallcap Growth Fund is 1.02 times less risky than Champlain Mid. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Champlain Mid Cap is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  2,618  in Champlain Mid Cap on December 1, 2024 and sell it today you would lose (333.00) from holding Champlain Mid Cap or give up 12.72% of portfolio value over 90 days.

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

Smallcap Growth Fund  vs.  Champlain Mid Cap

Smallcap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smallcap Growth Fund 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 basic 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.

Champlain Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Champlain Mid 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 primary 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.

Pair Trading with Smallcap Growth and Champlain Mid

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

The idea behind Smallcap Growth Fund and Champlain Mid 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.