Correlation Between COLUMBIA SPORTSWEAR and Porsche Automobil

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

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

Diversification Opportunities for COLUMBIA SPORTSWEAR and Porsche Automobil

-0.79

Correlation Coefficient

COLUMBIA SPORTSWEAR  Porsche Automobil

Pay attention - limited upside

The 3 months correlation between COLUMBIA and Porsche is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding COLUMBIA SPORTSWEAR and Porsche Automobil Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porsche Automobil Holding 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 Porsche Automobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porsche Automobil Holding has no effect on the direction of COLUMBIA SPORTSWEAR i.e., COLUMBIA SPORTSWEAR and Porsche Automobil go up and down completely randomly.

Pair Corralation between COLUMBIA SPORTSWEAR and Porsche Automobil

Assuming the 90 days trading horizon COLUMBIA SPORTSWEAR is expected to generate 1.07 times more return on investment than Porsche Automobil. However, COLUMBIA SPORTSWEAR is 1.07 times more volatile than Porsche Automobil Holding. It trades about 0.15 of its potential returns per unit of risk. Porsche Automobil Holding is currently generating about -0.1 per unit of risk. If you would invest  7,322  in COLUMBIA SPORTSWEAR on September 13, 2024 and sell it today you would earn a total of  1,228  from holding COLUMBIA SPORTSWEAR or generate 16.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

COLUMBIA SPORTSWEAR  vs.  Porsche Automobil Holding

COLUMBIA SPORTSWEAR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COLUMBIA SPORTSWEAR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, COLUMBIA SPORTSWEAR unveiled solid returns over the last few months and may actually be approaching a breakup point.

Porsche Automobil Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Porsche Automobil Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with COLUMBIA SPORTSWEAR and Porsche Automobil

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

The idea behind COLUMBIA SPORTSWEAR and Porsche Automobil Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.