Correlation Between Nasdaq and Columbia Floating

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

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

Diversification Opportunities for Nasdaq and Columbia Floating

0.9

Correlation Coefficient

Nasdaq  Columbia Floating

Almost no diversification

The 3 months correlation between Nasdaq and Columbia is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Columbia Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Floating Rate and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Columbia Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Floating Rate has no effect on the direction of Nasdaq i.e., Nasdaq and Columbia Floating go up and down completely randomly.

Pair Corralation between Nasdaq and Columbia Floating

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 7.79 times more return on investment than Columbia Floating. However, Nasdaq is 7.79 times more volatile than Columbia Floating Rate. It trades about 0.17 of its potential returns per unit of risk. Columbia Floating Rate is currently generating about 0.29 per unit of risk. If you would invest  7,268  in Nasdaq Inc on September 18, 2024 and sell it today you would earn a total of  778.00  from holding Nasdaq Inc or generate 10.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	79.37%
Values	Daily Returns

Nasdaq Inc  vs.  Columbia Floating Rate

Nasdaq Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Nasdaq may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Columbia Floating Rate

Risk-Adjusted Performance

0 of 100

Solid

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

Pair Trading with Nasdaq and Columbia Floating

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

The idea behind Nasdaq Inc and Columbia Floating Rate 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.