Correlation Between Columbia Floating and Biotechnology Fund

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

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

Diversification Opportunities for Columbia Floating and Biotechnology Fund

0.49

Correlation Coefficient

Columbia Floating  Biotechnology Fund

Very weak diversification

The 3 months correlation between Columbia and Biotechnology is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Floating Rate and Biotechnology Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biotechnology Fund Class and Columbia Floating 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 Floating Rate are associated (or correlated) with Biotechnology Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biotechnology Fund Class has no effect on the direction of Columbia Floating i.e., Columbia Floating and Biotechnology Fund go up and down completely randomly.

Pair Corralation between Columbia Floating and Biotechnology Fund

Assuming the 90 days horizon Columbia Floating is expected to generate 4.3 times less return on investment than Biotechnology Fund. But when comparing it to its historical volatility, Columbia Floating Rate is 7.29 times less risky than Biotechnology Fund. It trades about 0.06 of its potential returns per unit of risk. Biotechnology Fund Class is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,557  in Biotechnology Fund Class on December 24, 2024 and sell it today you would earn a total of  108.00  from holding Biotechnology Fund Class or generate 1.94% return on investment over 90 days.

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

Columbia Floating Rate  vs.  Biotechnology Fund Class

Columbia Floating Rate

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Floating Rate are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. 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.

Biotechnology Fund Class

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Biotechnology Fund Class are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Biotechnology Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Columbia Floating and Biotechnology Fund

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

The idea behind Columbia Floating Rate and Biotechnology Fund Class 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.