Correlation Between Levi Strauss and Columbia Sportswear

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

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

Diversification Opportunities for Levi Strauss and Columbia Sportswear

0.6

Correlation Coefficient

Levi Strauss  Columbia Sportswear

Poor diversification

The 3 months correlation between Levi and Columbia is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Levi Strauss Co and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear and Levi Strauss 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 Levi Strauss Co are associated (or correlated) with Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Levi Strauss i.e., Levi Strauss and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Levi Strauss and Columbia Sportswear

Given the investment horizon of 90 days Levi Strauss Co is expected to under-perform the Columbia Sportswear. In addition to that, Levi Strauss is 1.06 times more volatile than Columbia Sportswear. It trades about -0.06 of its total potential returns per unit of risk. Columbia Sportswear is currently generating about -0.06 per unit of volatility. If you would invest  8,317  in Columbia Sportswear on December 29, 2024 and sell it today you would lose (641.00) from holding Columbia Sportswear or give up 7.71% of portfolio value over 90 days.

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

Levi Strauss Co  vs.  Columbia Sportswear

Levi Strauss

Risk-Adjusted Performance

Very Weak

Over the last 90 days Levi Strauss Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Columbia Sportswear

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Levi Strauss and Columbia Sportswear

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

The idea behind Levi Strauss Co and Columbia Sportswear 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.