Correlation Between Invesco Gold and Columbia Ultra

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

By analyzing existing cross correlation between Invesco Gold Special and Columbia Ultra Short, you can compare the effects of market volatilities on Invesco Gold and Columbia Ultra 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 Invesco Gold with a short position of Columbia Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco Gold and Columbia Ultra.

Diversification Opportunities for Invesco Gold and Columbia Ultra

0.82

Correlation Coefficient

Invesco Gold  Columbia Ultra

Very poor diversification

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

Pair Corralation between Invesco Gold and Columbia Ultra

Assuming the 90 days horizon Invesco Gold Special is expected to generate 15.76 times more return on investment than Columbia Ultra. However, Invesco Gold is 15.76 times more volatile than Columbia Ultra Short. It trades about 0.26 of its potential returns per unit of risk. Columbia Ultra Short is currently generating about 0.21 per unit of risk. If you would invest  2,561  in Invesco Gold Special on December 29, 2024 and sell it today you would earn a total of  712.00  from holding Invesco Gold Special or generate 27.8% return on investment over 90 days.

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

Invesco Gold Special  vs.  Columbia Ultra Short

Invesco Gold Special

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Gold Special are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Invesco Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Columbia Ultra Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Ultra Short are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Columbia Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Gold and Columbia Ultra

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

The idea behind Invesco Gold Special and Columbia Ultra Short 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.