Correlation Between Columbia Contrarian and Columbia Balanced

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

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

Diversification Opportunities for Columbia Contrarian and Columbia Balanced

0.7

Correlation Coefficient

Columbia Contrarian  Columbia Balanced

Poor diversification

The 3 months correlation between Columbia and Columbia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Trarian Core and Columbia Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Balanced and Columbia Contrarian 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 Trarian Core are associated (or correlated) with Columbia Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Balanced has no effect on the direction of Columbia Contrarian i.e., Columbia Contrarian and Columbia Balanced go up and down completely randomly.

Pair Corralation between Columbia Contrarian and Columbia Balanced

Assuming the 90 days horizon Columbia Trarian Core is expected to under-perform the Columbia Balanced. In addition to that, Columbia Contrarian is 1.66 times more volatile than Columbia Balanced Fund. It trades about -0.12 of its total potential returns per unit of risk. Columbia Balanced Fund is currently generating about -0.1 per unit of volatility. If you would invest  5,515  in Columbia Balanced Fund on December 2, 2024 and sell it today you would lose (306.00) from holding Columbia Balanced Fund or give up 5.55% of portfolio value over 90 days.

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

Columbia Trarian Core  vs.  Columbia Balanced Fund

Columbia Trarian Core

Risk-Adjusted Performance

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.

Columbia Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Columbia Balanced 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 Contrarian and Columbia Balanced

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

The idea behind Columbia Trarian Core and Columbia Balanced Fund 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.