Correlation Between Columbia Sportswear and Ermenegildo Zegna

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

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

Diversification Opportunities for Columbia Sportswear and Ermenegildo Zegna

0.38

Correlation Coefficient

Columbia Sportswear  Ermenegildo Zegna

Weak diversification

The 3 months correlation between Columbia and Ermenegildo is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and Ermenegildo Zegna NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ermenegildo Zegna 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 Ermenegildo Zegna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ermenegildo Zegna has no effect on the direction of Columbia Sportswear i.e., Columbia Sportswear and Ermenegildo Zegna go up and down completely randomly.

Pair Corralation between Columbia Sportswear and Ermenegildo Zegna

Given the investment horizon of 90 days Columbia Sportswear is expected to generate 1.11 times more return on investment than Ermenegildo Zegna. However, Columbia Sportswear is 1.11 times more volatile than Ermenegildo Zegna NV. It trades about 0.08 of its potential returns per unit of risk. Ermenegildo Zegna NV is currently generating about -0.19 per unit of risk. If you would invest  8,958  in Columbia Sportswear on November 28, 2024 and sell it today you would earn a total of  322.00  from holding Columbia Sportswear or generate 3.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Columbia Sportswear  vs.  Ermenegildo Zegna NV

Columbia Sportswear

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, Columbia Sportswear may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Ermenegildo Zegna

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ermenegildo Zegna NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Ermenegildo Zegna may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Columbia Sportswear and Ermenegildo Zegna

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

The idea behind Columbia Sportswear and Ermenegildo Zegna NV 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.