Correlation Between Columbia Total and Columbia Select

Can any of the company-specific risk be diversified away by investing in both Columbia Total and Columbia Select 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 Select 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 Select Large Cap, you can compare the effects of market volatilities on Columbia Total and Columbia Select 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 Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Total and Columbia Select.

Diversification Opportunities for Columbia Total and Columbia Select

0.01

Correlation Coefficient

Columbia Total  Columbia Select

Significant diversification

The 3 months correlation between Columbia and Columbia is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Total Return and Columbia Select Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Large 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 Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Select Large has no effect on the direction of Columbia Total i.e., Columbia Total and Columbia Select go up and down completely randomly.

Pair Corralation between Columbia Total and Columbia Select

Assuming the 90 days horizon Columbia Total Return is expected to generate 0.42 times more return on investment than Columbia Select. However, Columbia Total Return is 2.36 times less risky than Columbia Select. It trades about 0.12 of its potential returns per unit of risk. Columbia Select Large Cap is currently generating about 0.05 per unit of risk. If you would invest  2,957  in Columbia Total Return on December 30, 2024 and sell it today you would earn a total of  81.00  from holding Columbia Total Return or generate 2.74% return on investment over 90 days.

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

Columbia Total Return  vs.  Columbia Select Large Cap

Columbia Total Return

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Total Return are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental 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 Select Large

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Select Large Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Columbia Select 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 Total and Columbia Select

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

The idea behind Columbia Total Return and Columbia Select Large 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.