Correlation Between Columbia Seligman and Columbia Select

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

By analyzing existing cross correlation between Columbia Seligman Munications and Columbia Select Smaller Cap, you can compare the effects of market volatilities on Columbia Seligman and Columbia Select 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 Seligman with a short position of Columbia Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Seligman and Columbia Select.

Diversification Opportunities for Columbia Seligman and Columbia Select

0.95

Correlation Coefficient

Columbia Seligman  Columbia Select

Almost no diversification

The 3 months correlation between Columbia and Columbia is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Seligman Munications and Columbia Select Smaller Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Smaller and Columbia Seligman 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 Seligman Munications are associated (or correlated) with Columbia Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Select Smaller has no effect on the direction of Columbia Seligman i.e., Columbia Seligman and Columbia Select go up and down completely randomly.

Pair Corralation between Columbia Seligman and Columbia Select

Assuming the 90 days horizon Columbia Seligman Munications is expected to under-perform the Columbia Select. In addition to that, Columbia Seligman is 1.53 times more volatile than Columbia Select Smaller Cap. It trades about -0.13 of its total potential returns per unit of risk. Columbia Select Smaller Cap is currently generating about -0.13 per unit of volatility. If you would invest  1,747  in Columbia Select Smaller Cap on December 30, 2024 and sell it today you would lose (153.00) from holding Columbia Select Smaller Cap or give up 8.76% of portfolio value over 90 days.

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

Columbia Seligman Munications  vs.  Columbia Select Smaller Cap

Columbia Seligman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Seligman Munications has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Columbia Select Smaller

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Select Smaller Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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 Seligman and Columbia Select

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

The idea behind Columbia Seligman Munications and Columbia Select Smaller Cap 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.