Correlation Between Multi Manager and Columbia Diversified

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

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

Diversification Opportunities for Multi Manager and Columbia Diversified

0.87

Correlation Coefficient

Multi Manager  Columbia Diversified

Very poor diversification

The 3 months correlation between Multi and Columbia is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager Directional Alte and Columbia Diversified Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Diversified and Multi Manager 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 Multi Manager Directional Alternative 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 Multi Manager i.e., Multi Manager and Columbia Diversified go up and down completely randomly.

Pair Corralation between Multi Manager and Columbia Diversified

Assuming the 90 days horizon Multi Manager Directional Alternative is expected to under-perform the Columbia Diversified. In addition to that, Multi Manager is 1.02 times more volatile than Columbia Diversified Equity. It trades about -0.03 of its total potential returns per unit of risk. Columbia Diversified Equity is currently generating about 0.04 per unit of volatility. If you would invest  1,627  in Columbia Diversified Equity on December 5, 2024 and sell it today you would earn a total of  16.00  from holding Columbia Diversified Equity or generate 0.98% return on investment over 90 days.

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

Multi Manager Directional Alte  vs.  Columbia Diversified Equity

Multi Manager Direct

Risk-Adjusted Performance

Very Weak

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

Columbia Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Diversified Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Multi Manager and Columbia Diversified

The main advantage of trading using opposite Multi Manager and Columbia Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi Manager 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 Multi Manager Directional Alternative and Columbia Diversified Equity 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.

Check out your portfolio center.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.