Correlation Between Columbia Emerging and Invesco SP

Can any of the company-specific risk be diversified away by investing in both Columbia Emerging and Invesco SP 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 Invesco SP 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 Invesco SP 500, you can compare the effects of market volatilities on Columbia Emerging and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Emerging and Invesco SP.

Diversification Opportunities for Columbia Emerging and Invesco SP

-0.48

Correlation Coefficient

Columbia Emerging  Invesco SP

Very good diversification

The 3 months correlation between Columbia and Invesco is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Emerging Markets and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Columbia Emerging i.e., Columbia Emerging and Invesco SP go up and down completely randomly.

Pair Corralation between Columbia Emerging and Invesco SP

Given the investment horizon of 90 days Columbia Emerging Markets is expected to under-perform the Invesco SP. In addition to that, Columbia Emerging is 1.14 times more volatile than Invesco SP 500. It trades about -0.1 of its total potential returns per unit of risk. Invesco SP 500 is currently generating about 0.08 per unit of volatility. If you would invest  3,274  in Invesco SP 500 on October 21, 2024 and sell it today you would earn a total of  133.00  from holding Invesco SP 500 or generate 4.06% return on investment over 90 days.

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

Columbia Emerging Markets  vs.  Invesco SP 500

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 very healthy basic indicators, Columbia Emerging is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Invesco SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Invesco SP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Columbia Emerging and Invesco SP

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

The idea behind Columbia Emerging Markets and Invesco SP 500 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.