Correlation Between Columbia Small and Multi Manager

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

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

Diversification Opportunities for Columbia Small and Multi Manager

0.93

Correlation Coefficient

Columbia Small  Multi Manager

Almost no diversification

The 3 months correlation between Columbia and Multi is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Small Cap and Multi Manager Directional Alte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Direct and Columbia Small 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 Small Cap are associated (or correlated) with Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager Direct has no effect on the direction of Columbia Small i.e., Columbia Small and Multi Manager go up and down completely randomly.

Pair Corralation between Columbia Small and Multi Manager

Assuming the 90 days horizon Columbia Small Cap is expected to generate 1.56 times more return on investment than Multi Manager. However, Columbia Small is 1.56 times more volatile than Multi Manager Directional Alternative. It trades about 0.16 of its potential returns per unit of risk. Multi Manager Directional Alternative is currently generating about 0.22 per unit of risk. If you would invest  5,104  in Columbia Small Cap on September 12, 2024 and sell it today you would earn a total of  606.00  from holding Columbia Small Cap or generate 11.87% return on investment over 90 days.

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

Columbia Small Cap  vs.  Multi Manager Directional Alte

Columbia Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Columbia Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Multi Manager Direct

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager Directional Alternative are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multi Manager may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Columbia Small and Multi Manager

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

The idea behind Columbia Small Cap and Multi Manager Directional Alternative 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.