Correlation Between FlexShares Core and Columbia Diversified

Can any of the company-specific risk be diversified away by investing in both FlexShares Core and Columbia Diversified 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 FlexShares Core and Columbia Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FlexShares Core Select and Columbia Diversified Fixed, you can compare the effects of market volatilities on FlexShares Core and Columbia Diversified 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 FlexShares Core with a short position of Columbia Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Core and Columbia Diversified.

Diversification Opportunities for FlexShares Core and Columbia Diversified

0.56

Correlation Coefficient

FlexShares Core  Columbia Diversified

Very weak diversification

The 3 months correlation between FlexShares and Columbia is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Core Select and Columbia Diversified Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Diversified and FlexShares Core 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 FlexShares Core Select are associated (or correlated) with Columbia Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Diversified has no effect on the direction of FlexShares Core i.e., FlexShares Core and Columbia Diversified go up and down completely randomly.

Pair Corralation between FlexShares Core and Columbia Diversified

Given the investment horizon of 90 days FlexShares Core Select is expected to generate 0.92 times more return on investment than Columbia Diversified. However, FlexShares Core Select is 1.09 times less risky than Columbia Diversified. It trades about -0.37 of its potential returns per unit of risk. Columbia Diversified Fixed is currently generating about -0.38 per unit of risk. If you would invest  2,192  in FlexShares Core Select on October 15, 2024 and sell it today you would lose (40.00) from holding FlexShares Core Select or give up 1.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

FlexShares Core Select  vs.  Columbia Diversified Fixed

FlexShares Core Select

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FlexShares Core Select has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, FlexShares Core is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Columbia Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Diversified Fixed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Columbia Diversified is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with FlexShares Core and Columbia Diversified

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

The idea behind FlexShares Core Select and Columbia Diversified Fixed 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.