Correlation Between Columbia Convertible and Litman Gregory

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

Diversification Opportunities for Columbia Convertible and Litman Gregory

0.06

Correlation Coefficient

Columbia Convertible  Litman Gregory

Significant diversification

The 3 months correlation between Columbia and Litman is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Convertible Securitie and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Columbia Convertible i.e., Columbia Convertible and Litman Gregory go up and down completely randomly.

Pair Corralation between Columbia Convertible and Litman Gregory

Assuming the 90 days horizon Columbia Convertible Securities is expected to generate 0.59 times more return on investment than Litman Gregory. However, Columbia Convertible Securities is 1.7 times less risky than Litman Gregory. It trades about -0.2 of its potential returns per unit of risk. Litman Gregory Masters is currently generating about -0.15 per unit of risk. If you would invest  2,281  in Columbia Convertible Securities on October 6, 2024 and sell it today you would lose (65.00) from holding Columbia Convertible Securities or give up 2.85% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	46.34%
Values	Daily Returns

Columbia Convertible Securitie  vs.  Litman Gregory Masters

Columbia Convertible

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Convertible Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Litman Gregory Masters

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Litman Gregory Masters has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Columbia Convertible and Litman Gregory

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

The idea behind Columbia Convertible Securities and Litman Gregory Masters 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.