Correlation Between Columbia Adaptive and Columbia Thermostat

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

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

Diversification Opportunities for Columbia Adaptive and Columbia Thermostat

0.94

Correlation Coefficient

Columbia Adaptive  Columbia Thermostat

Almost no diversification

The 3 months correlation between Columbia and Columbia is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Adaptive Risk and Columbia Thermostat Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Thermostat and Columbia Adaptive 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 Adaptive Risk are associated (or correlated) with Columbia Thermostat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Thermostat has no effect on the direction of Columbia Adaptive i.e., Columbia Adaptive and Columbia Thermostat go up and down completely randomly.

Pair Corralation between Columbia Adaptive and Columbia Thermostat

Assuming the 90 days horizon Columbia Adaptive Risk is expected to generate 1.2 times more return on investment than Columbia Thermostat. However, Columbia Adaptive is 1.2 times more volatile than Columbia Thermostat Fund. It trades about 0.1 of its potential returns per unit of risk. Columbia Thermostat Fund is currently generating about 0.09 per unit of risk. If you would invest  986.00  in Columbia Adaptive Risk on September 12, 2024 and sell it today you would earn a total of  23.00  from holding Columbia Adaptive Risk or generate 2.33% return on investment over 90 days.

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

Columbia Adaptive Risk  vs.  Columbia Thermostat Fund

Columbia Adaptive Risk

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Adaptive Risk are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Adaptive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Thermostat

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Thermostat Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Thermostat 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 Adaptive and Columbia Thermostat

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

The idea behind Columbia Adaptive Risk and Columbia Thermostat Fund 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.