Correlation Between Columbia Total and Columbia Mid

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

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

Diversification Opportunities for Columbia Total and Columbia Mid

-0.74

Correlation Coefficient

Columbia Total  Columbia Mid

Pay attention - limited upside

The 3 months correlation between Columbia and Columbia is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Total Return and Columbia Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Mid Cap and Columbia Total 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 Total Return are associated (or correlated) with Columbia Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Mid Cap has no effect on the direction of Columbia Total i.e., Columbia Total and Columbia Mid go up and down completely randomly.

Pair Corralation between Columbia Total and Columbia Mid

Assuming the 90 days horizon Columbia Total Return is expected to under-perform the Columbia Mid. But the mutual fund apears to be less risky and, when comparing its historical volatility, Columbia Total Return is 3.14 times less risky than Columbia Mid. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Columbia Mid Cap is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  2,296  in Columbia Mid Cap on September 1, 2024 and sell it today you would earn a total of  578.00  from holding Columbia Mid Cap or generate 25.17% return on investment over 90 days.

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

Columbia Total Return  vs.  Columbia Mid Cap

Columbia Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Mid Cap

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Mid Cap are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Columbia Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Columbia Total and Columbia Mid

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

The idea behind Columbia Total Return and Columbia Mid Cap 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.