Correlation Between Columbia Emerging and First Trust

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

By analyzing existing cross correlation between Columbia Emerging Markets and First Trust Consumer, you can compare the effects of market volatilities on Columbia Emerging and First Trust 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 Emerging with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Emerging and First Trust.

Diversification Opportunities for Columbia Emerging and First Trust

-0.69

Correlation Coefficient

Columbia Emerging  First Trust

Excellent diversification

The 3 months correlation between Columbia and First is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Emerging Markets and First Trust Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Consumer and Columbia Emerging 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 Emerging Markets are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Consumer has no effect on the direction of Columbia Emerging i.e., Columbia Emerging and First Trust go up and down completely randomly.

Pair Corralation between Columbia Emerging and First Trust

Given the investment horizon of 90 days Columbia Emerging is expected to generate 5.71 times less return on investment than First Trust. But when comparing it to its historical volatility, Columbia Emerging Markets is 1.2 times less risky than First Trust. It trades about 0.01 of its potential returns per unit of risk. First Trust Consumer is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,872  in First Trust Consumer on September 26, 2024 and sell it today you would earn a total of  1,732  from holding First Trust Consumer or generate 35.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Columbia Emerging Markets  vs.  First Trust Consumer

Columbia Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

First Trust Consumer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Consumer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, First Trust is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Columbia Emerging and First Trust

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

The idea behind Columbia Emerging Markets and First Trust Consumer 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.