Correlation Between Columbia Ultra and Columbia Emerging

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

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

Diversification Opportunities for Columbia Ultra and Columbia Emerging

0.48

Correlation Coefficient

Columbia Ultra  Columbia Emerging

Very weak diversification

The 3 months correlation between Columbia and Columbia is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Ultra Short and Columbia Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Emerging Markets and Columbia Ultra 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 Ultra Short are associated (or correlated) with Columbia Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Emerging Markets has no effect on the direction of Columbia Ultra i.e., Columbia Ultra and Columbia Emerging go up and down completely randomly.

Pair Corralation between Columbia Ultra and Columbia Emerging

Assuming the 90 days horizon Columbia Ultra Short is not expected to generate positive returns. However, Columbia Ultra Short is 5.71 times less risky than Columbia Emerging. It waists most of its returns potential to compensate for thr risk taken. Columbia Emerging is generating about 0.38 per unit of risk. If you would invest  1,336  in Columbia Emerging Markets on September 18, 2024 and sell it today you would earn a total of  10.00  from holding Columbia Emerging Markets or generate 0.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	35.0%
Values	Daily Returns

Columbia Ultra Short  vs.  Columbia Emerging Markets

Columbia Ultra Short

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Ultra Short are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Columbia Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Emerging Markets

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Columbia Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Columbia Emerging 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 Ultra and Columbia Emerging

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

The idea behind Columbia Ultra Short and Columbia Emerging Markets 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.