Correlation Between Columbia Sportswear and Molson Coors

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

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

Diversification Opportunities for Columbia Sportswear and Molson Coors

0.83

Correlation Coefficient

Columbia Sportswear  Molson Coors

Very poor diversification

The 3 months correlation between Columbia and Molson is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Columbia Sportswear i.e., Columbia Sportswear and Molson Coors go up and down completely randomly.

Pair Corralation between Columbia Sportswear and Molson Coors

Assuming the 90 days horizon Columbia Sportswear is expected to generate 1.24 times more return on investment than Molson Coors. However, Columbia Sportswear is 1.24 times more volatile than Molson Coors Beverage. It trades about 0.12 of its potential returns per unit of risk. Molson Coors Beverage is currently generating about -0.06 per unit of risk. If you would invest  8,250  in Columbia Sportswear on September 28, 2024 and sell it today you would earn a total of  200.00  from holding Columbia Sportswear or generate 2.42% return on investment over 90 days.

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

Columbia Sportswear  vs.  Molson Coors Beverage

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.

Molson Coors Beverage

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Molson Coors may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Columbia Sportswear and Molson Coors

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

The idea behind Columbia Sportswear and Molson Coors Beverage 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.