Correlation Between Columbia Sportswear and Wearable Devices

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

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

Diversification Opportunities for Columbia Sportswear and Wearable Devices

-0.51

Correlation Coefficient

Columbia Sportswear  Wearable Devices

Excellent diversification

The 3 months correlation between Columbia and Wearable is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and Wearable Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wearable Devices 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 Wearable Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wearable Devices has no effect on the direction of Columbia Sportswear i.e., Columbia Sportswear and Wearable Devices go up and down completely randomly.

Pair Corralation between Columbia Sportswear and Wearable Devices

Given the investment horizon of 90 days Columbia Sportswear is expected to under-perform the Wearable Devices. But the stock apears to be less risky and, when comparing its historical volatility, Columbia Sportswear is 40.78 times less risky than Wearable Devices. The stock trades about -0.07 of its potential returns per unit of risk. The Wearable Devices is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  30.00  in Wearable Devices on December 30, 2024 and sell it today you would earn a total of  220.00  from holding Wearable Devices or generate 733.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.55%
Values	Daily Returns

Columbia Sportswear  vs.  Wearable Devices

Columbia Sportswear

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Sportswear has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Wearable Devices

Risk-Adjusted Performance

Solid

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

Pair Trading with Columbia Sportswear and Wearable Devices

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

The idea behind Columbia Sportswear and Wearable Devices 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.