Correlation Between Columbia Sportswear and Exchange Bankshares

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

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

Diversification Opportunities for Columbia Sportswear and Exchange Bankshares

0.69

Correlation Coefficient

Columbia Sportswear  Exchange Bankshares

Poor diversification

The 3 months correlation between Columbia and Exchange is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and Exchange Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bankshares and Columbia Sportswear 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 Sportswear are associated (or correlated) with Exchange Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bankshares has no effect on the direction of Columbia Sportswear i.e., Columbia Sportswear and Exchange Bankshares go up and down completely randomly.

Pair Corralation between Columbia Sportswear and Exchange Bankshares

Given the investment horizon of 90 days Columbia Sportswear is expected to generate 19.0 times less return on investment than Exchange Bankshares. But when comparing it to its historical volatility, Columbia Sportswear is 1.23 times less risky than Exchange Bankshares. It trades about 0.0 of its potential returns per unit of risk. Exchange Bankshares is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,431  in Exchange Bankshares on October 11, 2024 and sell it today you would earn a total of  359.00  from holding Exchange Bankshares or generate 8.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	62.63%
Values	Daily Returns

Columbia Sportswear  vs.  Exchange Bankshares

Columbia Sportswear

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Columbia Sportswear is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Exchange Bankshares

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Bankshares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Exchange Bankshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Columbia Sportswear and Exchange Bankshares

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

The idea behind Columbia Sportswear and Exchange Bankshares 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.