Correlation Between Scout Core and Chartwell Small

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

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

Diversification Opportunities for Scout Core and Chartwell Small

0.29

Correlation Coefficient

Scout Core  Chartwell Small

Modest diversification

The 3 months correlation between Scout and Chartwell is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Scout E Plus and Chartwell Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chartwell Small Cap and Scout Core 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 Scout E Plus are associated (or correlated) with Chartwell Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chartwell Small Cap has no effect on the direction of Scout Core i.e., Scout Core and Chartwell Small go up and down completely randomly.

Pair Corralation between Scout Core and Chartwell Small

Assuming the 90 days horizon Scout E Plus is expected to under-perform the Chartwell Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Scout E Plus is 4.72 times less risky than Chartwell Small. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Chartwell Small Cap is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,747  in Chartwell Small Cap on October 8, 2024 and sell it today you would lose (15.00) from holding Chartwell Small Cap or give up 0.86% of portfolio value over 90 days.

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

Scout E Plus  vs.  Chartwell Small Cap

Scout E Plus

Risk-Adjusted Performance

0 of 100

Very Weak

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

Chartwell Small Cap

Risk-Adjusted Performance

0 of 100

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 fairly strong technical and fundamental indicators, Chartwell 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 Scout Core and Chartwell Small

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

The idea behind Scout E Plus and Chartwell 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.