Correlation Between Columbia Multi and Columbia Diversified

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

By analyzing existing cross correlation between Columbia Multi Sector Municipal and Columbia Diversified Fixed, you can compare the effects of market volatilities on Columbia Multi and Columbia Diversified 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 Multi with a short position of Columbia Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Multi and Columbia Diversified.

Diversification Opportunities for Columbia Multi and Columbia Diversified

0.53

Correlation Coefficient

Columbia Multi  Columbia Diversified

Very weak diversification

The 3 months correlation between Columbia and Columbia is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Multi Sector Municipa and Columbia Diversified Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Diversified and Columbia Multi 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 Multi Sector Municipal are associated (or correlated) with Columbia Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Diversified has no effect on the direction of Columbia Multi i.e., Columbia Multi and Columbia Diversified go up and down completely randomly.

Pair Corralation between Columbia Multi and Columbia Diversified

Given the investment horizon of 90 days Columbia Multi Sector Municipal is expected to under-perform the Columbia Diversified. In addition to that, Columbia Multi is 1.17 times more volatile than Columbia Diversified Fixed. It trades about -0.02 of its total potential returns per unit of risk. Columbia Diversified Fixed is currently generating about 0.14 per unit of volatility. If you would invest  1,742  in Columbia Diversified Fixed on December 30, 2024 and sell it today you would earn a total of  43.00  from holding Columbia Diversified Fixed or generate 2.47% return on investment over 90 days.

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

Columbia Multi Sector Municipa  vs.  Columbia Diversified Fixed

Columbia Multi Sector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Multi Sector Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Columbia Multi is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Columbia Diversified

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Diversified Fixed are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Columbia Diversified is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Columbia Multi and Columbia Diversified

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

The idea behind Columbia Multi Sector Municipal and Columbia Diversified Fixed 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.