Correlation Between Multi-manager High and Columbia Treasury

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

By analyzing existing cross correlation between Multi Manager High Yield and Columbia Treasury Index, you can compare the effects of market volatilities on Multi-manager High and Columbia Treasury 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 Multi-manager High with a short position of Columbia Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi-manager High and Columbia Treasury.

Diversification Opportunities for Multi-manager High and Columbia Treasury

0.7

Correlation Coefficient

Multi-manager High  Columbia Treasury

Poor diversification

The 3 months correlation between Multi-manager and Columbia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager High Yield and Columbia Treasury Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Treasury Index and Multi-manager High 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 Multi Manager High Yield are associated (or correlated) with Columbia Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Treasury Index has no effect on the direction of Multi-manager High i.e., Multi-manager High and Columbia Treasury go up and down completely randomly.

Pair Corralation between Multi-manager High and Columbia Treasury

Assuming the 90 days horizon Multi-manager High is expected to generate 1.97 times less return on investment than Columbia Treasury. But when comparing it to its historical volatility, Multi Manager High Yield is 1.78 times less risky than Columbia Treasury. It trades about 0.12 of its potential returns per unit of risk. Columbia Treasury Index is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  972.00  in Columbia Treasury Index on December 25, 2024 and sell it today you would earn a total of  23.00  from holding Columbia Treasury Index or generate 2.37% return on investment over 90 days.

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

Multi Manager High Yield  vs.  Columbia Treasury Index

Multi Manager High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager High Yield are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi-manager High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Treasury Index

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Treasury Index are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Treasury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Multi-manager High and Columbia Treasury

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

The idea behind Multi Manager High Yield and Columbia Treasury Index 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.