Correlation Between Multi Manager and Columbia Large

Can any of the company-specific risk be diversified away by investing in both Multi Manager and Columbia Large 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 Large 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 Large Cap, you can compare the effects of market volatilities on Multi Manager and Columbia Large 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 Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Manager and Columbia Large.

Diversification Opportunities for Multi Manager and Columbia Large

0.79

Correlation Coefficient

Multi Manager  Columbia Large

Poor diversification

The 3 months correlation between Multi and Columbia is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager Directional Alte and Columbia Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Large Cap 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 Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Large Cap has no effect on the direction of Multi Manager i.e., Multi Manager and Columbia Large go up and down completely randomly.

Pair Corralation between Multi Manager and Columbia Large

Assuming the 90 days horizon Multi Manager is expected to generate 2.99 times less return on investment than Columbia Large. But when comparing it to its historical volatility, Multi Manager Directional Alternative is 1.3 times less risky than Columbia Large. It trades about 0.04 of its potential returns per unit of risk. Columbia Large Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,126  in Columbia Large Cap on September 24, 2024 and sell it today you would earn a total of  2,014  from holding Columbia Large Cap or generate 48.81% return on investment over 90 days.

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

Multi Manager Directional Alte  vs.  Columbia Large Cap

Multi Manager Direct

Risk-Adjusted Performance

0 of 100

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

Columbia Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Multi Manager and Columbia Large

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

The idea behind Multi Manager Directional Alternative and Columbia Large Cap 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.