Correlation Between Boston Trust and Columbia Acorn

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

By analyzing existing cross correlation between Boston Trust Asset and Columbia Acorn European, you can compare the effects of market volatilities on Boston Trust and Columbia Acorn 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 Boston Trust with a short position of Columbia Acorn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Trust and Columbia Acorn.

Diversification Opportunities for Boston Trust and Columbia Acorn

0.43

Correlation Coefficient

Boston Trust  Columbia Acorn

Very weak diversification

The 3 months correlation between Boston and Columbia is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Boston Trust Asset and Columbia Acorn European in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Acorn European and Boston Trust 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 Boston Trust Asset are associated (or correlated) with Columbia Acorn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Acorn European has no effect on the direction of Boston Trust i.e., Boston Trust and Columbia Acorn go up and down completely randomly.

Pair Corralation between Boston Trust and Columbia Acorn

Assuming the 90 days horizon Boston Trust is expected to generate 1.03 times less return on investment than Columbia Acorn. But when comparing it to its historical volatility, Boston Trust Asset is 1.84 times less risky than Columbia Acorn. It trades about 0.06 of its potential returns per unit of risk. Columbia Acorn European is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,157  in Columbia Acorn European on September 29, 2024 and sell it today you would earn a total of  345.00  from holding Columbia Acorn European or generate 15.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.77%
Values	Daily Returns

Boston Trust Asset  vs.  Columbia Acorn European

Boston Trust Asset

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Acorn European

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Acorn European has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Boston Trust and Columbia Acorn

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

The idea behind Boston Trust Asset and Columbia Acorn European 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.