Correlation Between First Trust and Columbia Multi

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

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

Diversification Opportunities for First Trust and Columbia Multi

0.85

Correlation Coefficient

First Trust  Columbia Multi

Very poor diversification

The 3 months correlation between First and Columbia is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Managed and Columbia Multi Sector Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Multi Sector and First Trust 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 First Trust Managed are associated (or correlated) with Columbia Multi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Multi Sector has no effect on the direction of First Trust i.e., First Trust and Columbia Multi go up and down completely randomly.

Pair Corralation between First Trust and Columbia Multi

Considering the 90-day investment horizon First Trust is expected to generate 1.6 times less return on investment than Columbia Multi. But when comparing it to its historical volatility, First Trust Managed is 1.48 times less risky than Columbia Multi. It trades about 0.05 of its potential returns per unit of risk. Columbia Multi Sector Municipal is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,056  in Columbia Multi Sector Municipal on September 5, 2024 and sell it today you would earn a total of  25.00  from holding Columbia Multi Sector Municipal or generate 1.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

First Trust Managed  vs.  Columbia Multi Sector Municipa

First Trust Managed

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Managed are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, First Trust is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Columbia Multi Sector

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Multi Sector Municipal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Columbia Multi is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Trust and Columbia Multi

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

The idea behind First Trust Managed and Columbia Multi Sector Municipal 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.