Correlation Between Columbia Sportswear and Adobe

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

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

Diversification Opportunities for Columbia Sportswear and Adobe

0.05

Correlation Coefficient

Columbia Sportswear  Adobe

Significant diversification

The 3 months correlation between Columbia and Adobe is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc and Columbia Sportswear 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 Sportswear are associated (or correlated) with Adobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Inc has no effect on the direction of Columbia Sportswear i.e., Columbia Sportswear and Adobe go up and down completely randomly.

Pair Corralation between Columbia Sportswear and Adobe

Assuming the 90 days horizon Columbia Sportswear is expected to generate 0.67 times more return on investment than Adobe. However, Columbia Sportswear is 1.49 times less risky than Adobe. It trades about 0.13 of its potential returns per unit of risk. Adobe Inc is currently generating about -0.03 per unit of risk. If you would invest  7,172  in Columbia Sportswear on October 24, 2024 and sell it today you would earn a total of  878.00  from holding Columbia Sportswear or generate 12.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Columbia Sportswear  vs.  Adobe Inc

Columbia Sportswear

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Columbia Sportswear reported solid returns over the last few months and may actually be approaching a breakup point.

Adobe Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adobe Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Adobe is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Columbia Sportswear and Adobe

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

The idea behind Columbia Sportswear and Adobe Inc 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.

Check out your portfolio center.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.