Correlation Between Columbia and Columbia Convertible

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

By analyzing existing cross correlation between Columbia Treasury Index and Columbia Vertible Securities, you can compare the effects of market volatilities on Columbia and Columbia Convertible 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 with a short position of Columbia Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia and Columbia Convertible.

Diversification Opportunities for Columbia and Columbia Convertible

-0.09

Correlation Coefficient

Columbia  Columbia Convertible

Good diversification

The 3 months correlation between Columbia and Columbia is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Treasury Index and Columbia Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Convertible and Columbia 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 Treasury Index are associated (or correlated) with Columbia Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Convertible has no effect on the direction of Columbia i.e., Columbia and Columbia Convertible go up and down completely randomly.

Pair Corralation between Columbia and Columbia Convertible

Assuming the 90 days horizon Columbia Treasury Index is expected to under-perform the Columbia Convertible. But the mutual fund apears to be less risky and, when comparing its historical volatility, Columbia Treasury Index is 1.91 times less risky than Columbia Convertible. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Columbia Vertible Securities is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,202  in Columbia Vertible Securities on October 11, 2024 and sell it today you would earn a total of  56.00  from holding Columbia Vertible Securities or generate 2.54% return on investment over 90 days.

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

Columbia Treasury Index  vs.  Columbia Vertible Securities

Columbia Treasury Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Treasury Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Convertible

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Vertible Securities are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Convertible 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 and Columbia Convertible

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

The idea behind Columbia Treasury Index and Columbia Vertible Securities 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.