Correlation Between Columbia Large and Grant Park

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

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

Diversification Opportunities for Columbia Large and Grant Park

-0.44

Correlation Coefficient

Columbia Large  Grant Park

Very good diversification

The 3 months correlation between Columbia and Grant is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Large Cap and Grant Park Multi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grant Park Multi and Columbia Large 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 Large Cap are associated (or correlated) with Grant Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grant Park Multi has no effect on the direction of Columbia Large i.e., Columbia Large and Grant Park go up and down completely randomly.

Pair Corralation between Columbia Large and Grant Park

Assuming the 90 days horizon Columbia Large Cap is expected to generate 2.21 times more return on investment than Grant Park. However, Columbia Large is 2.21 times more volatile than Grant Park Multi. It trades about 0.12 of its potential returns per unit of risk. Grant Park Multi is currently generating about -0.19 per unit of risk. If you would invest  2,102  in Columbia Large Cap on September 27, 2024 and sell it today you would earn a total of  108.00  from holding Columbia Large Cap or generate 5.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	68.25%
Values	Daily Returns

Columbia Large Cap  vs.  Grant Park Multi

Columbia Large Cap

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Columbia Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Columbia Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Grant Park Multi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grant Park Multi has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Grant Park 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 Large and Grant Park

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

The idea behind Columbia Large Cap and Grant Park Multi 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.