Correlation Between Columbia India and IShares MSCI

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

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

Diversification Opportunities for Columbia India and IShares MSCI

0.96

Correlation Coefficient

Columbia India  IShares MSCI

Almost no diversification

The 3 months correlation between Columbia and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Columbia India Consumer and iShares MSCI India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI India and Columbia India 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 India Consumer are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI India has no effect on the direction of Columbia India i.e., Columbia India and IShares MSCI go up and down completely randomly.

Pair Corralation between Columbia India and IShares MSCI

Given the investment horizon of 90 days Columbia India Consumer is expected to generate 0.71 times more return on investment than IShares MSCI. However, Columbia India Consumer is 1.4 times less risky than IShares MSCI. It trades about -0.11 of its potential returns per unit of risk. iShares MSCI India is currently generating about -0.1 per unit of risk. If you would invest  6,428  in Columbia India Consumer on December 30, 2024 and sell it today you would lose (490.00) from holding Columbia India Consumer or give up 7.62% of portfolio value over 90 days.

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

Columbia India Consumer  vs.  iShares MSCI India

Columbia India Consumer

Risk-Adjusted Performance

Very Weak

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

iShares MSCI India

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Columbia India and IShares MSCI

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

The idea behind Columbia India Consumer and iShares MSCI India 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.