Correlation Between Columbia Commodity and Large-cap Growth

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

By analyzing existing cross correlation between Columbia Modity Strategy and Large Cap Growth Profund, you can compare the effects of market volatilities on Columbia Commodity and Large-cap Growth 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 Commodity with a short position of Large-cap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Commodity and Large-cap Growth.

Diversification Opportunities for Columbia Commodity and Large-cap Growth

-0.3

Correlation Coefficient

Columbia Commodity  Large-cap Growth

Very good diversification

The 3 months correlation between Columbia and Large-cap is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Modity Strategy and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth and Columbia Commodity 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 Modity Strategy are associated (or correlated) with Large-cap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Columbia Commodity i.e., Columbia Commodity and Large-cap Growth go up and down completely randomly.

Pair Corralation between Columbia Commodity and Large-cap Growth

Assuming the 90 days horizon Columbia Modity Strategy is expected to generate 0.45 times more return on investment than Large-cap Growth. However, Columbia Modity Strategy is 2.24 times less risky than Large-cap Growth. It trades about 0.19 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about -0.11 per unit of risk. If you would invest  939.00  in Columbia Modity Strategy on December 29, 2024 and sell it today you would earn a total of  74.00  from holding Columbia Modity Strategy or generate 7.88% return on investment over 90 days.

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

Columbia Modity Strategy  vs.  Large Cap Growth Profund

Columbia Modity Strategy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Modity Strategy are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Columbia Commodity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Large Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Large Cap Growth Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Columbia Commodity and Large-cap Growth

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

The idea behind Columbia Modity Strategy and Large Cap Growth Profund 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.