Correlation Between SPDR MSCI and Columbia

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

By analyzing existing cross correlation between SPDR MSCI Emerging and Columbia EM Core, you can compare the effects of market volatilities on SPDR MSCI and Columbia 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 SPDR MSCI with a short position of Columbia. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and Columbia.

Diversification Opportunities for SPDR MSCI and Columbia

0.8

Correlation Coefficient

SPDR MSCI  Columbia

Very poor diversification

The 3 months correlation between SPDR and Columbia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Emerging and Columbia EM Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia EM Core and SPDR MSCI 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 SPDR MSCI Emerging are associated (or correlated) with Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia EM Core has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and Columbia go up and down completely randomly.

Pair Corralation between SPDR MSCI and Columbia

Given the investment horizon of 90 days SPDR MSCI Emerging is expected to generate 0.79 times more return on investment than Columbia. However, SPDR MSCI Emerging is 1.26 times less risky than Columbia. It trades about 0.05 of its potential returns per unit of risk. Columbia EM Core is currently generating about 0.0 per unit of risk. If you would invest  5,722  in SPDR MSCI Emerging on December 28, 2024 and sell it today you would earn a total of  134.00  from holding SPDR MSCI Emerging or generate 2.34% return on investment over 90 days.

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

SPDR MSCI Emerging  vs.  Columbia EM Core

SPDR MSCI Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Emerging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, SPDR MSCI is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Columbia EM Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia EM Core has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Columbia is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SPDR MSCI and Columbia

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

The idea behind SPDR MSCI Emerging and Columbia EM Core 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.