Correlation Between Columbia Acorn and Boston Trust

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

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

Diversification Opportunities for Columbia Acorn and Boston Trust

-0.19

Correlation Coefficient

Columbia Acorn  Boston Trust

Good diversification

The 3 months correlation between Columbia and Boston is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Acorn European and Boston Trust Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Asset and Columbia Acorn 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 Acorn European are associated (or correlated) with Boston Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Trust Asset has no effect on the direction of Columbia Acorn i.e., Columbia Acorn and Boston Trust go up and down completely randomly.

Pair Corralation between Columbia Acorn and Boston Trust

Assuming the 90 days horizon Columbia Acorn European is expected to generate 1.89 times more return on investment than Boston Trust. However, Columbia Acorn is 1.89 times more volatile than Boston Trust Asset. It trades about 0.08 of its potential returns per unit of risk. Boston Trust Asset is currently generating about 0.06 per unit of risk. If you would invest  2,087  in Columbia Acorn European on September 29, 2024 and sell it today you would earn a total of  256.00  from holding Columbia Acorn European or generate 12.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	27.22%
Values	Daily Returns

Columbia Acorn European  vs.  Boston Trust Asset

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 fairly strong fundamental indicators, Columbia Acorn is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Columbia Acorn and Boston Trust

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

The idea behind Columbia Acorn European and Boston Trust Asset 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.