Correlation Between COLUMBIA SPORTSWEAR and TFS FINANCIAL

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

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

Diversification Opportunities for COLUMBIA SPORTSWEAR and TFS FINANCIAL

0.37

Correlation Coefficient

COLUMBIA SPORTSWEAR  TFS FINANCIAL

Weak diversification

The 3 months correlation between COLUMBIA and TFS is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding COLUMBIA SPORTSWEAR and TFS FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFS FINANCIAL 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 TFS FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFS FINANCIAL has no effect on the direction of COLUMBIA SPORTSWEAR i.e., COLUMBIA SPORTSWEAR and TFS FINANCIAL go up and down completely randomly.

Pair Corralation between COLUMBIA SPORTSWEAR and TFS FINANCIAL

Assuming the 90 days trading horizon COLUMBIA SPORTSWEAR is expected to under-perform the TFS FINANCIAL. In addition to that, COLUMBIA SPORTSWEAR is 1.23 times more volatile than TFS FINANCIAL. It trades about -0.12 of its total potential returns per unit of risk. TFS FINANCIAL is currently generating about -0.04 per unit of volatility. If you would invest  1,184  in TFS FINANCIAL on December 23, 2024 and sell it today you would lose (64.00) from holding TFS FINANCIAL or give up 5.41% of portfolio value over 90 days.

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

COLUMBIA SPORTSWEAR  vs.  TFS FINANCIAL

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 unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

TFS FINANCIAL

Risk-Adjusted Performance

Very Weak

Over the last 90 days TFS FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TFS FINANCIAL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with COLUMBIA SPORTSWEAR and TFS FINANCIAL

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

The idea behind COLUMBIA SPORTSWEAR and TFS FINANCIAL 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.