Correlation Between Hartford Multifactor and Columbia

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

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

Diversification Opportunities for Hartford Multifactor and Columbia

0.85

Correlation Coefficient

Hartford Multifactor  Columbia

Very poor diversification

The 3 months correlation between Hartford and Columbia is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Multifactor 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 Hartford Multifactor 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 Hartford Multifactor 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 Hartford Multifactor i.e., Hartford Multifactor and Columbia go up and down completely randomly.

Pair Corralation between Hartford Multifactor and Columbia

Given the investment horizon of 90 days Hartford Multifactor Emerging is expected to under-perform the Columbia. But the etf apears to be less risky and, when comparing its historical volatility, Hartford Multifactor Emerging is 1.02 times less risky than Columbia. The etf trades about -0.17 of its potential returns per unit of risk. The Columbia EM Core is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  3,174  in Columbia EM Core on September 2, 2024 and sell it today you would lose (68.00) from holding Columbia EM Core or give up 2.14% of portfolio value over 90 days.

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

Hartford Multifactor Emerging  vs.  Columbia EM Core

Hartford Multifactor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Multifactor Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Hartford Multifactor is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Columbia EM Core

Risk-Adjusted Performance

0 of 100

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 Hartford Multifactor and Columbia

The main advantage of trading using opposite Hartford Multifactor and Columbia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hartford Multifactor 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 Hartford Multifactor 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.