Correlation Between American Funds and Columbia Disciplined

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

By analyzing existing cross correlation between American Funds American and Columbia Disciplined Value, you can compare the effects of market volatilities on American Funds and Columbia Disciplined 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 American Funds with a short position of Columbia Disciplined. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Columbia Disciplined.

Diversification Opportunities for American Funds and Columbia Disciplined

-0.52

Correlation Coefficient

American Funds  Columbia Disciplined

Excellent diversification

The 3 months correlation between American and Columbia is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Columbia Disciplined Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Disciplined and American Funds 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 American Funds American are associated (or correlated) with Columbia Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Disciplined has no effect on the direction of American Funds i.e., American Funds and Columbia Disciplined go up and down completely randomly.

Pair Corralation between American Funds and Columbia Disciplined

If you would invest  5,605  in American Funds American on October 27, 2024 and sell it today you would earn a total of  141.00  from holding American Funds American or generate 2.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	5.26%
Values	Daily Returns

American Funds American  vs.  Columbia Disciplined Value

American Funds American

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Disciplined

Risk-Adjusted Performance

0 of 100

Solid

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

Pair Trading with American Funds and Columbia Disciplined

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

The idea behind American Funds American and Columbia Disciplined Value 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.