Correlation Between Kensington Defender and Columbia Global

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

By analyzing existing cross correlation between Kensington Defender Institutional and Columbia Global Technology, you can compare the effects of market volatilities on Kensington Defender and Columbia Global 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 Kensington Defender with a short position of Columbia Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kensington Defender and Columbia Global.

Diversification Opportunities for Kensington Defender and Columbia Global

-0.02

Correlation Coefficient

Kensington Defender  Columbia Global

Good diversification

The 3 months correlation between Kensington and Columbia is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Defender Institutio and Columbia Global Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Global Tech and Kensington Defender 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 Kensington Defender Institutional are associated (or correlated) with Columbia Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Global Tech has no effect on the direction of Kensington Defender i.e., Kensington Defender and Columbia Global go up and down completely randomly.

Pair Corralation between Kensington Defender and Columbia Global

Assuming the 90 days horizon Kensington Defender is expected to generate 20.6 times less return on investment than Columbia Global. But when comparing it to its historical volatility, Kensington Defender Institutional is 1.97 times less risky than Columbia Global. It trades about 0.01 of its potential returns per unit of risk. Columbia Global Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,566  in Columbia Global Technology on October 22, 2024 and sell it today you would earn a total of  1,082  from holding Columbia Global Technology or generate 12.63% return on investment over 90 days.

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

Kensington Defender Institutio  vs.  Columbia Global Technology

Kensington Defender

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kensington Defender Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Kensington Defender is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Global Tech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Global Technology are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kensington Defender and Columbia Global

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

The idea behind Kensington Defender Institutional and Columbia Global Technology 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.