Correlation Between Columbia Tax-exempt and Catalyst/millburn

Can any of the company-specific risk be diversified away by investing in both Columbia Tax-exempt and Catalyst/millburn 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 Columbia Tax-exempt and Catalyst/millburn into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Columbia Tax Exempt Fund and Catalystmillburn Hedge Strategy, you can compare the effects of market volatilities on Columbia Tax-exempt and Catalyst/millburn 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 Columbia Tax-exempt with a short position of Catalyst/millburn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Tax-exempt and Catalyst/millburn.

Diversification Opportunities for Columbia Tax-exempt and Catalyst/millburn

0.1

Correlation Coefficient

Columbia Tax-exempt  Catalyst/millburn

Average diversification

The 3 months correlation between Columbia and Catalyst/millburn is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Tax Exempt Fund and Catalystmillburn Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Hedge and Columbia Tax-exempt 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 Columbia Tax Exempt Fund are associated (or correlated) with Catalyst/millburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Hedge has no effect on the direction of Columbia Tax-exempt i.e., Columbia Tax-exempt and Catalyst/millburn go up and down completely randomly.

Pair Corralation between Columbia Tax-exempt and Catalyst/millburn

Assuming the 90 days horizon Columbia Tax-exempt is expected to generate 21.43 times less return on investment than Catalyst/millburn. But when comparing it to its historical volatility, Columbia Tax Exempt Fund is 1.45 times less risky than Catalyst/millburn. It trades about 0.01 of its potential returns per unit of risk. Catalystmillburn Hedge Strategy is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,832  in Catalystmillburn Hedge Strategy on October 23, 2024 and sell it today you would earn a total of  173.00  from holding Catalystmillburn Hedge Strategy or generate 4.51% return on investment over 90 days.

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

Columbia Tax Exempt Fund  vs.  Catalystmillburn Hedge Strateg

Columbia Tax Exempt

Risk-Adjusted Performance

0 of 100

Very Weak

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

Catalystmillburn Hedge

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Catalyst/millburn is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Columbia Tax-exempt and Catalyst/millburn

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

The idea behind Columbia Tax Exempt Fund and Catalystmillburn Hedge Strategy 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.