Correlation Between Champlain Small and Inverse Government
Can any of the company-specific risk be diversified away by investing in both Champlain Small and Inverse Government 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 Champlain Small and Inverse Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champlain Small and Inverse Government Long, you can compare the effects of market volatilities on Champlain Small and Inverse Government 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 Champlain Small with a short position of Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champlain Small and Inverse Government.
Diversification Opportunities for Champlain Small and Inverse Government
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Champlain and Inverse is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government Long and Champlain Small 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 Champlain Small are associated (or correlated) with Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of Champlain Small i.e., Champlain Small and Inverse Government go up and down completely randomly.
Pair Corralation between Champlain Small and Inverse Government
Assuming the 90 days horizon Champlain Small is expected to generate 1.33 times more return on investment than Inverse Government. However, Champlain Small is 1.33 times more volatile than Inverse Government Long. It trades about 0.08 of its potential returns per unit of risk. Inverse Government Long is currently generating about 0.03 per unit of risk. If you would invest 2,038 in Champlain Small on August 24, 2024 and sell it today you would earn a total of 467.00 from holding Champlain Small or generate 22.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Champlain Small vs. Inverse Government Long
Performance |
| Timeline |
| Champlain Small |
| Inverse Government Long |
Champlain Small and Inverse Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Champlain Small and Inverse Government
The main advantage of trading using opposite Champlain Small and Inverse Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champlain Small position performs unexpectedly, Inverse Government 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 Inverse Government will offset losses from the drop in Inverse Government's long position.| Champlain Small vs. The Hartford Midcap | Champlain Small vs. Mfs Emerging Markets | Champlain Small vs. Wells Fargo Special | Champlain Small vs. Washington Mutual Investors |
| Inverse Government vs. The Hartford Small | Inverse Government vs. Champlain Small | Inverse Government vs. Qs Small Capitalization | Inverse Government vs. Ab Small Cap |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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