Correlation Between Small Cap and Champlain Small
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 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 and Champlain Small, you can compare the effects of market volatilities on Small Cap 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 with a short position of Champlain Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Champlain Small.
Diversification Opportunities for Small Cap and Champlain Small
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SMALL and Champlain is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value 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 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 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 i.e., Small Cap and Champlain Small go up and down completely randomly.
Pair Corralation between Small Cap and Champlain Small
Assuming the 90 days horizon Small Cap is expected to generate 1.02 times less return on investment than Champlain Small. In addition to that, Small Cap is 1.02 times more volatile than Champlain Small. It trades about 0.04 of its total potential returns per unit of risk. Champlain Small is currently generating about 0.04 per unit of volatility. If you would invest 2,040 in Champlain Small on August 25, 2024 and sell it today you would earn a total of 506.00 from holding Champlain Small or generate 24.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Champlain Small
Performance |
| Timeline |
| Small Cap Value |
| Champlain Small |
Small Cap and Champlain Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Champlain Small
The main advantage of trading using opposite Small Cap and Champlain Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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 vs. Regional Bank Fund | Small Cap vs. Regional Bank Fund | Small Cap vs. Multimanager Lifestyle Moderate | Small Cap vs. Multimanager Lifestyle Balanced |
| Champlain Small vs. Washington Mutual Investors | Champlain Small vs. Baron Emerging Markets | Champlain Small vs. Aquagold International | Champlain Small vs. Morningstar Unconstrained Allocation |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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