Correlation Between Columbia Dividend and Transamerica Multi-managed

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

By analyzing existing cross correlation between Columbia Dividend Opportunity and Transamerica Multi Managed Balanced, you can compare the effects of market volatilities on Columbia Dividend and Transamerica Multi-managed 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 Dividend with a short position of Transamerica Multi-managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Dividend and Transamerica Multi-managed.

Diversification Opportunities for Columbia Dividend and Transamerica Multi-managed

0.58

Correlation Coefficient

Columbia Dividend  Transamerica Multi-managed

Very weak diversification

The 3 months correlation between Columbia and Transamerica is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Dividend Opportunity and Transamerica Multi Managed Bal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Multi-managed and Columbia Dividend 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 Dividend Opportunity are associated (or correlated) with Transamerica Multi-managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Multi-managed has no effect on the direction of Columbia Dividend i.e., Columbia Dividend and Transamerica Multi-managed go up and down completely randomly.

Pair Corralation between Columbia Dividend and Transamerica Multi-managed

Assuming the 90 days horizon Columbia Dividend Opportunity is expected to generate 1.05 times more return on investment than Transamerica Multi-managed. However, Columbia Dividend is 1.05 times more volatile than Transamerica Multi Managed Balanced. It trades about -0.06 of its potential returns per unit of risk. Transamerica Multi Managed Balanced is currently generating about -0.12 per unit of risk. If you would invest  4,138  in Columbia Dividend Opportunity on December 2, 2024 and sell it today you would lose (152.00) from holding Columbia Dividend Opportunity or give up 3.67% of portfolio value over 90 days.

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

Columbia Dividend Opportunity  vs.  Transamerica Multi Managed Bal

Columbia Dividend

Risk-Adjusted Performance

Very Weak

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

Transamerica Multi-managed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Multi Managed Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Columbia Dividend and Transamerica Multi-managed

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

The idea behind Columbia Dividend Opportunity and Transamerica Multi Managed Balanced 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.