Correlation Between Columbia Strategic and Columbia

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

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

Diversification Opportunities for Columbia Strategic and Columbia

0.82

Correlation Coefficient

Columbia Strategic  Columbia

Very poor diversification

The 3 months correlation between Columbia and Columbia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Strategic Municipal and Columbia Government Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Government and Columbia Strategic 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 Strategic Municipal are associated (or correlated) with Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Government has no effect on the direction of Columbia Strategic i.e., Columbia Strategic and Columbia go up and down completely randomly.

Pair Corralation between Columbia Strategic and Columbia

Assuming the 90 days horizon Columbia Strategic Municipal is expected to generate 0.86 times more return on investment than Columbia. However, Columbia Strategic Municipal is 1.17 times less risky than Columbia. It trades about -0.01 of its potential returns per unit of risk. Columbia Government Mortgage is currently generating about -0.03 per unit of risk. If you would invest  1,471  in Columbia Strategic Municipal on October 25, 2024 and sell it today you would lose (3.00) from holding Columbia Strategic Municipal or give up 0.2% of portfolio value over 90 days.

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

Columbia Strategic Municipal  vs.  Columbia Government Mortgage

Columbia Strategic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Columbia Strategic and Columbia

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

The idea behind Columbia Strategic Municipal and Columbia Government Mortgage 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.