Correlation Between Columbia Sportswear and COLUMBIA SPORTSWEAR

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

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

Diversification Opportunities for Columbia Sportswear and COLUMBIA SPORTSWEAR

1.0

Correlation Coefficient

Columbia Sportswear  COLUMBIA SPORTSWEAR

No risk reduction

The 3 months correlation between Columbia and COLUMBIA is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and COLUMBIA SPORTSWEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COLUMBIA SPORTSWEAR has no effect on the direction of Columbia Sportswear i.e., Columbia Sportswear and COLUMBIA SPORTSWEAR go up and down completely randomly.

Pair Corralation between Columbia Sportswear and COLUMBIA SPORTSWEAR

Assuming the 90 days horizon Columbia Sportswear is expected to under-perform the COLUMBIA SPORTSWEAR. But the stock apears to be less risky and, when comparing its historical volatility, Columbia Sportswear is 1.02 times less risky than COLUMBIA SPORTSWEAR. The stock trades about -0.1 of its potential returns per unit of risk. The COLUMBIA SPORTSWEAR is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  8,171  in COLUMBIA SPORTSWEAR on December 30, 2024 and sell it today you would lose (1,071) from holding COLUMBIA SPORTSWEAR or give up 13.11% of portfolio value over 90 days.

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

Columbia Sportswear  vs.  COLUMBIA SPORTSWEAR

Columbia Sportswear

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Sportswear has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

COLUMBIA SPORTSWEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days COLUMBIA SPORTSWEAR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Columbia Sportswear and COLUMBIA SPORTSWEAR

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

The idea behind Columbia Sportswear and COLUMBIA SPORTSWEAR 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.