Correlation Between Walden Smid and Champlain Mid

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

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

Diversification Opportunities for Walden Smid and Champlain Mid

0.96

Correlation Coefficient

Walden Smid  Champlain Mid

Almost no diversification

The 3 months correlation between Walden and Champlain is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Walden Smid Cap 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 Walden Smid 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 Walden Smid Cap 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 Walden Smid i.e., Walden Smid and Champlain Mid go up and down completely randomly.

Pair Corralation between Walden Smid and Champlain Mid

Assuming the 90 days horizon Walden Smid Cap is expected to generate 0.87 times more return on investment than Champlain Mid. However, Walden Smid Cap is 1.14 times less risky than Champlain Mid. It trades about -0.06 of its potential returns per unit of risk. Champlain Mid Cap is currently generating about -0.09 per unit of risk. If you would invest  2,464  in Walden Smid Cap on December 30, 2024 and sell it today you would lose (83.00) from holding Walden Smid Cap or give up 3.37% of portfolio value over 90 days.

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

Walden Smid Cap  vs.  Champlain Mid Cap

Walden Smid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Walden Smid and Champlain Mid

The main advantage of trading using opposite Walden Smid and Champlain Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walden Smid 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 Walden Smid Cap 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.