Correlation Between Columbia Small and Growth Equity

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

By analyzing existing cross correlation between Columbia Small Cap and The Growth Equity, you can compare the effects of market volatilities on Columbia Small and Growth Equity 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 Small with a short position of Growth Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Small and Growth Equity.

Diversification Opportunities for Columbia Small and Growth Equity

-0.7

Correlation Coefficient

Columbia Small  Growth Equity

Excellent diversification

The 3 months correlation between Columbia and Growth is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Small Cap and The Growth Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Equity and Columbia Small 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 Small Cap are associated (or correlated) with Growth Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Equity has no effect on the direction of Columbia Small i.e., Columbia Small and Growth Equity go up and down completely randomly.

Pair Corralation between Columbia Small and Growth Equity

If you would invest  5,792  in Columbia Small Cap on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Columbia Small Cap or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	5.0%
Values	Daily Returns

Columbia Small Cap  vs.  The Growth Equity

Columbia Small Cap

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Columbia Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Columbia Small showed solid returns over the last few months and may actually be approaching a breakup point.

Growth Equity

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Growth Equity are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Growth Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Columbia Small and Growth Equity

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

The idea behind Columbia Small Cap and The Growth Equity 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.