Correlation Between Columbia Dividend and Columbia Contrarian

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

By analyzing existing cross correlation between Columbia Dividend Income and Columbia Trarian Core, you can compare the effects of market volatilities on Columbia Dividend and Columbia Contrarian 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 Dividend with a short position of Columbia Contrarian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Dividend and Columbia Contrarian.

Diversification Opportunities for Columbia Dividend and Columbia Contrarian

0.94

Correlation Coefficient

Columbia Dividend  Columbia Contrarian

Almost no diversification

The 3 months correlation between Columbia and Columbia is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Dividend Income and Columbia Trarian Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Trarian Core and Columbia Dividend 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 Dividend Income are associated (or correlated) with Columbia Contrarian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Trarian Core has no effect on the direction of Columbia Dividend i.e., Columbia Dividend and Columbia Contrarian go up and down completely randomly.

Pair Corralation between Columbia Dividend and Columbia Contrarian

Assuming the 90 days horizon Columbia Dividend Income is expected to generate 0.56 times more return on investment than Columbia Contrarian. However, Columbia Dividend Income is 1.78 times less risky than Columbia Contrarian. It trades about -0.06 of its potential returns per unit of risk. Columbia Trarian Core is currently generating about -0.08 per unit of risk. If you would invest  3,384  in Columbia Dividend Income on October 21, 2024 and sell it today you would lose (120.00) from holding Columbia Dividend Income or give up 3.55% of portfolio value over 90 days.

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

Columbia Dividend Income  vs.  Columbia Trarian Core

Columbia Dividend Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Trarian Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Trarian Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Columbia Dividend and Columbia Contrarian

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

The idea behind Columbia Dividend Income and Columbia Trarian Core 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.