Correlation Between Tax Free and Champlain Small

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

By analyzing existing cross correlation between Tax Free Conservative Income and Champlain Small, you can compare the effects of market volatilities on Tax Free 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 Tax Free with a short position of Champlain Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tax Free and Champlain Small.

Diversification Opportunities for Tax Free and Champlain Small

0.48

Correlation Coefficient

Tax Free  Champlain Small

Very weak diversification

The 3 months correlation between Tax and Champlain is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Tax Free Conservative Income and Champlain Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Small and Tax Free 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 Tax Free Conservative Income 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 Tax Free i.e., Tax Free and Champlain Small go up and down completely randomly.

Pair Corralation between Tax Free and Champlain Small

Assuming the 90 days horizon Tax Free is expected to generate 9.61 times less return on investment than Champlain Small. But when comparing it to its historical volatility, Tax Free Conservative Income is 29.26 times less risky than Champlain Small. It trades about 0.22 of its potential returns per unit of risk. Champlain Small is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,115  in Champlain Small on May 3, 2025 and sell it today you would earn a total of  96.00  from holding Champlain Small or generate 4.54% return on investment over 90 days.

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

Tax Free Conservative Income  vs.  Champlain Small

Tax Free Conservative

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Free Conservative Income are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax Free is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Champlain Small

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Champlain Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tax Free and Champlain Small

The main advantage of trading using opposite Tax Free and Champlain Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tax Free 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.

The idea behind Tax Free Conservative Income and Champlain Small 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.