Correlation Between Biotechnology Fund and Columbia Convertible

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

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

Diversification Opportunities for Biotechnology Fund and Columbia Convertible

-0.45

Correlation Coefficient

Biotechnology Fund  Columbia Convertible

Very good diversification

The 3 months correlation between Biotechnology and Columbia is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Columbia Vertible Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Convertible and Biotechnology Fund 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 Biotechnology Fund Class are associated (or correlated) with Columbia Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Convertible has no effect on the direction of Biotechnology Fund i.e., Biotechnology Fund and Columbia Convertible go up and down completely randomly.

Pair Corralation between Biotechnology Fund and Columbia Convertible

Assuming the 90 days horizon Biotechnology Fund Class is expected to under-perform the Columbia Convertible. In addition to that, Biotechnology Fund is 2.48 times more volatile than Columbia Vertible Securities. It trades about -0.02 of its total potential returns per unit of risk. Columbia Vertible Securities is currently generating about 0.32 per unit of volatility. If you would invest  2,059  in Columbia Vertible Securities on September 4, 2024 and sell it today you would earn a total of  193.00  from holding Columbia Vertible Securities or generate 9.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Biotechnology Fund Class  vs.  Columbia Vertible Securities

Biotechnology Fund Class

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Convertible

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Vertible Securities are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Columbia Convertible may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Biotechnology Fund and Columbia Convertible

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

The idea behind Biotechnology Fund Class and Columbia Vertible Securities 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.