Correlation Between Champlain Small and Columbia Dividend

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

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

Diversification Opportunities for Champlain Small and Columbia Dividend

0.7

Correlation Coefficient

Champlain Small  Columbia Dividend

Poor diversification

The 3 months correlation between Champlain and Columbia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Champlain Small and Columbia Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Dividend Income and Champlain 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 Champlain Small are associated (or correlated) with Columbia Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Dividend Income has no effect on the direction of Champlain Small i.e., Champlain Small and Columbia Dividend go up and down completely randomly.

Pair Corralation between Champlain Small and Columbia Dividend

Assuming the 90 days horizon Champlain Small is expected to generate 3.4 times less return on investment than Columbia Dividend. In addition to that, Champlain Small is 1.41 times more volatile than Columbia Dividend Income. It trades about 0.04 of its total potential returns per unit of risk. Columbia Dividend Income is currently generating about 0.21 per unit of volatility. If you would invest  3,386  in Columbia Dividend Income on October 22, 2024 and sell it today you would earn a total of  84.00  from holding Columbia Dividend Income or generate 2.48% return on investment over 90 days.

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

Champlain Small  vs.  Columbia Dividend Income

Champlain Small

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Champlain Small are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Champlain Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Dividend Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Champlain Small and Columbia Dividend

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

The idea behind Champlain Small and Columbia Dividend Income 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.