Correlation Between Columbia Convertible and American Beacon
Can any of the company-specific risk be diversified away by investing in both Columbia Convertible and American Beacon 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 Convertible and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Convertible Securities and American Beacon Small, you can compare the effects of market volatilities on Columbia Convertible and American Beacon 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 Convertible with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Convertible and American Beacon.
Diversification Opportunities for Columbia Convertible and American Beacon
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Columbia and American is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Convertible Securitie and American Beacon Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Small and Columbia Convertible 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 Convertible Securities are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Small has no effect on the direction of Columbia Convertible i.e., Columbia Convertible and American Beacon go up and down completely randomly.
Pair Corralation between Columbia Convertible and American Beacon
Assuming the 90 days horizon Columbia Convertible Securities is expected to generate 0.38 times more return on investment than American Beacon. However, Columbia Convertible Securities is 2.64 times less risky than American Beacon. It trades about -0.15 of its potential returns per unit of risk. American Beacon Small is currently generating about -0.38 per unit of risk. If you would invest 2,267 in Columbia Convertible Securities on October 8, 2024 and sell it today you would lose (51.00) from holding Columbia Convertible Securities or give up 2.25% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Columbia Convertible Securitie vs. American Beacon Small
Performance |
Timeline |
Columbia Convertible |
American Beacon Small |
Columbia Convertible and American Beacon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Columbia Convertible and American Beacon
The main advantage of trading using opposite Columbia Convertible and American Beacon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Convertible position performs unexpectedly, American Beacon 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 American Beacon will offset losses from the drop in American Beacon's long position.Columbia Convertible vs. Vanguard Total Stock | Columbia Convertible vs. Vanguard 500 Index | Columbia Convertible vs. Vanguard Total Stock | Columbia Convertible vs. Vanguard Total Stock |
American Beacon vs. Aqr Global Macro | American Beacon vs. Ab Global Bond | American Beacon vs. Morgan Stanley Global | American Beacon vs. Barings Global Floating |
Check out your portfolio center.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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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