Correlation Between Multi-manager Directional and Columbia Disciplined

Can any of the company-specific risk be diversified away by investing in both Multi-manager Directional and Columbia Disciplined 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 Directional and Columbia Disciplined 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 Disciplined Value, you can compare the effects of market volatilities on Multi-manager Directional and Columbia Disciplined 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 Directional with a short position of Columbia Disciplined. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi-manager Directional and Columbia Disciplined.

Diversification Opportunities for Multi-manager Directional and Columbia Disciplined

0.86

Correlation Coefficient

Multi-manager Directional  Columbia Disciplined

Very poor diversification

The 3 months correlation between Multi-manager and Columbia is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager Directional Alte and Columbia Disciplined Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Disciplined and Multi-manager Directional 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 Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Disciplined has no effect on the direction of Multi-manager Directional i.e., Multi-manager Directional and Columbia Disciplined go up and down completely randomly.

Pair Corralation between Multi-manager Directional and Columbia Disciplined

Assuming the 90 days horizon Multi Manager Directional Alternative is expected to under-perform the Columbia Disciplined. But the mutual fund apears to be less risky and, when comparing its historical volatility, Multi Manager Directional Alternative is 1.1 times less risky than Columbia Disciplined. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Columbia Disciplined Value is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  855.00  in Columbia Disciplined Value on December 28, 2024 and sell it today you would earn a total of  8.00  from holding Columbia Disciplined Value or generate 0.94% 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 Disciplined Value

Multi-manager Directional

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

Columbia Disciplined

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Disciplined Value are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Disciplined 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 Directional and Columbia Disciplined

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

The idea behind Multi Manager Directional Alternative and Columbia Disciplined Value 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.