Correlation Between Columbia Small and Columbia Capital

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

By analyzing existing cross correlation between Columbia Small Cap and Columbia Capital Allocation, you can compare the effects of market volatilities on Columbia Small and Columbia Capital 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 Small with a short position of Columbia Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Small and Columbia Capital.

Diversification Opportunities for Columbia Small and Columbia Capital

0.86

Correlation Coefficient

Columbia Small  Columbia Capital

Very poor diversification

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

Pair Corralation between Columbia Small and Columbia Capital

Assuming the 90 days horizon Columbia Small Cap is expected to generate 1.83 times more return on investment than Columbia Capital. However, Columbia Small is 1.83 times more volatile than Columbia Capital Allocation. It trades about 0.08 of its potential returns per unit of risk. Columbia Capital Allocation is currently generating about 0.08 per unit of risk. If you would invest  1,744  in Columbia Small Cap on September 3, 2024 and sell it today you would earn a total of  1,030  from holding Columbia Small Cap or generate 59.06% return on investment over 90 days.

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

Columbia Small Cap  vs.  Columbia Capital Allocation

Columbia Small Cap

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Small Cap are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Columbia Small showed solid returns over the last few months and may actually be approaching a breakup point.

Columbia Capital All

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Capital Allocation are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Columbia Capital 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 Small and Columbia Capital

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

The idea behind Columbia Small Cap and Columbia Capital Allocation 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.