Correlation Between Champlain Small and Extended Market
Can any of the company-specific risk be diversified away by investing in both Champlain Small and Extended Market 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 Extended Market into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Champlain Small and Extended Market Index, you can compare the effects of market volatilities on Champlain Small and Extended Market 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 Extended Market. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champlain Small and Extended Market.
Diversification Opportunities for Champlain Small and Extended Market
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Champlain and Extended is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Extended Market Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Extended Market Index 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 Extended Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Extended Market Index has no effect on the direction of Champlain Small i.e., Champlain Small and Extended Market go up and down completely randomly.
Pair Corralation between Champlain Small and Extended Market
Assuming the 90 days horizon Champlain Small is expected to generate 1.15 times more return on investment than Extended Market. However, Champlain Small is 1.15 times more volatile than Extended Market Index. It trades about 0.13 of its potential returns per unit of risk. Extended Market Index is currently generating about 0.14 per unit of risk. If you would invest 2,273 in Champlain Small on October 24, 2024 and sell it today you would earn a total of 54.00 from holding Champlain Small or generate 2.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Champlain Small vs. Extended Market Index
Performance |
Timeline |
Champlain Small |
Extended Market Index |
Champlain Small and Extended Market Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Champlain Small and Extended Market
The main advantage of trading using opposite Champlain Small and Extended Market positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champlain Small position performs unexpectedly, Extended Market 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 Extended Market will offset losses from the drop in Extended Market'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 |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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