Correlation Between Columbia Real and Simt Small

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

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

Diversification Opportunities for Columbia Real and Simt Small

0.83

Correlation Coefficient

Columbia Real  Simt Small

Very poor diversification

The 3 months correlation between Columbia and Simt is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Real Estate and Simt Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Small Cap and Columbia Real 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 Real Estate are associated (or correlated) with Simt Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Small Cap has no effect on the direction of Columbia Real i.e., Columbia Real and Simt Small go up and down completely randomly.

Pair Corralation between Columbia Real and Simt Small

Assuming the 90 days horizon Columbia Real Estate is expected to under-perform the Simt Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Columbia Real Estate is 1.56 times less risky than Simt Small. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Simt Small Cap is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,716  in Simt Small Cap on October 23, 2024 and sell it today you would lose (47.00) from holding Simt Small Cap or give up 1.26% of portfolio value over 90 days.

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

Columbia Real Estate  vs.  Simt Small Cap

Columbia Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Real Estate has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Simt Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simt Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Simt Small 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 Real and Simt Small

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

The idea behind Columbia Real Estate and Simt Small Cap 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.