Correlation Between COLUMBIA SPORTSWEAR and Targa Resources

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

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

Diversification Opportunities for COLUMBIA SPORTSWEAR and Targa Resources

0.59

Correlation Coefficient

COLUMBIA SPORTSWEAR  Targa Resources

Very weak diversification

The 3 months correlation between COLUMBIA and Targa is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding COLUMBIA SPORTSWEAR and Targa Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources Corp 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 Targa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Targa Resources Corp has no effect on the direction of COLUMBIA SPORTSWEAR i.e., COLUMBIA SPORTSWEAR and Targa Resources go up and down completely randomly.

Pair Corralation between COLUMBIA SPORTSWEAR and Targa Resources

Assuming the 90 days trading horizon COLUMBIA SPORTSWEAR is expected to generate 3.87 times less return on investment than Targa Resources. But when comparing it to its historical volatility, COLUMBIA SPORTSWEAR is 1.39 times less risky than Targa Resources. It trades about 0.1 of its potential returns per unit of risk. Targa Resources Corp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  15,170  in Targa Resources Corp on October 22, 2024 and sell it today you would earn a total of  5,830  from holding Targa Resources Corp or generate 38.43% return on investment over 90 days.

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

COLUMBIA SPORTSWEAR  vs.  Targa Resources Corp

COLUMBIA SPORTSWEAR

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in COLUMBIA SPORTSWEAR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, COLUMBIA SPORTSWEAR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Targa Resources Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Targa Resources Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Targa Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with COLUMBIA SPORTSWEAR and Targa Resources

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

The idea behind COLUMBIA SPORTSWEAR and Targa Resources Corp 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.