Correlation Between Small-cap Value and Champlain Small
Can any of the company-specific risk be diversified away by investing in both Small-cap Value 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 Small-cap Value and Champlain Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Fund and Champlain Small, you can compare the effects of market volatilities on Small-cap Value 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 Small-cap Value with a short position of Champlain Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Champlain Small.
Diversification Opportunities for Small-cap Value and Champlain Small
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small-cap and Champlain is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Fund and Champlain Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Small and Small-cap Value 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 Small Cap Value Fund 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 Small-cap Value i.e., Small-cap Value and Champlain Small go up and down completely randomly.
Pair Corralation between Small-cap Value and Champlain Small
Assuming the 90 days horizon Small Cap Value Fund is expected to under-perform the Champlain Small. In addition to that, Small-cap Value is 1.33 times more volatile than Champlain Small. It trades about -0.16 of its total potential returns per unit of risk. Champlain Small is currently generating about -0.03 per unit of volatility. If you would invest 2,327 in Champlain Small on November 22, 2024 and sell it today you would lose (11.00) from holding Champlain Small or give up 0.47% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Fund vs. Champlain Small
Performance |
| Timeline |
| Small Cap Value |
| Champlain Small |
Small-cap Value and Champlain Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Champlain Small
The main advantage of trading using opposite Small-cap Value and Champlain Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value 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.| Small-cap Value vs. Hsbc Treasury Money | Small-cap Value vs. Money Market Obligations | Small-cap Value vs. Fidelity Government Money | Small-cap Value vs. Franklin Government Money |
| Champlain Small vs. The Hartford Midcap | Champlain Small vs. Mfs Emerging Markets | Champlain Small vs. Wells Fargo Special | Champlain Small vs. Washington Mutual Investors |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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