Correlation Between Champlain Small and Baird Aggregate

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

By analyzing existing cross correlation between Champlain Small and Baird Aggregate Bond, you can compare the effects of market volatilities on Champlain Small and Baird Aggregate 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 Baird Aggregate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Champlain Small and Baird Aggregate.

Diversification Opportunities for Champlain Small and Baird Aggregate

-0.61

Correlation Coefficient

Champlain Small  Baird Aggregate

Excellent diversification

The 3 months correlation between Champlain and Baird is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Baird Aggregate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baird Aggregate Bond 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 Baird Aggregate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baird Aggregate Bond has no effect on the direction of Champlain Small i.e., Champlain Small and Baird Aggregate go up and down completely randomly.

Pair Corralation between Champlain Small and Baird Aggregate

Assuming the 90 days horizon Champlain Small is expected to generate 3.41 times more return on investment than Baird Aggregate. However, Champlain Small is 3.41 times more volatile than Baird Aggregate Bond. It trades about 0.07 of its potential returns per unit of risk. Baird Aggregate Bond is currently generating about 0.07 per unit of risk. If you would invest  2,101  in Champlain Small on September 2, 2024 and sell it today you would earn a total of  451.00  from holding Champlain Small or generate 21.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Champlain Small  vs.  Baird Aggregate Bond

Champlain Small

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Champlain Small showed solid returns over the last few months and may actually be approaching a breakup point.

Baird Aggregate Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Champlain Small and Baird Aggregate

The main advantage of trading using opposite Champlain Small and Baird Aggregate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Champlain Small position performs unexpectedly, Baird Aggregate 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 Baird Aggregate will offset losses from the drop in Baird Aggregate's long position.

The idea behind Champlain Small and Baird Aggregate Bond 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.