Correlation Between Power Dividend and Champlain Small

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

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

Diversification Opportunities for Power Dividend and Champlain Small

0.68

Correlation Coefficient

Power Dividend  Champlain Small

Poor diversification

The 3 months correlation between Power and Champlain is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Power Dividend Index and Champlain Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Small and Power Dividend 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 Power Dividend Index 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 Power Dividend i.e., Power Dividend and Champlain Small go up and down completely randomly.

Pair Corralation between Power Dividend and Champlain Small

Assuming the 90 days horizon Power Dividend Index is expected to under-perform the Champlain Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Power Dividend Index is 1.64 times less risky than Champlain Small. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Champlain Small is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,281  in Champlain Small on October 4, 2024 and sell it today you would lose (33.00) from holding Champlain Small or give up 1.45% of portfolio value over 90 days.

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

Power Dividend Index  vs.  Champlain Small

Power Dividend Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Dividend Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Power Dividend 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

0 of 100

Very Weak

Over the last 90 days Champlain Small has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pair Trading with Power Dividend and Champlain Small

The main advantage of trading using opposite Power Dividend and Champlain Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Dividend 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 Power Dividend Index 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.

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.