Correlation Between Sentinel Small and Columbia Acorn

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

By analyzing existing cross correlation between Sentinel Small Pany and Columbia Acorn Usa, you can compare the effects of market volatilities on Sentinel Small and Columbia Acorn 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 Sentinel Small with a short position of Columbia Acorn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sentinel Small and Columbia Acorn.

Diversification Opportunities for Sentinel Small and Columbia Acorn

-0.27

Correlation Coefficient

Sentinel Small  Columbia Acorn

Very good diversification

The 3 months correlation between Sentinel and Columbia is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sentinel Small Pany and Columbia Acorn Usa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Acorn Usa and Sentinel Small 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 Sentinel Small Pany are associated (or correlated) with Columbia Acorn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Acorn Usa has no effect on the direction of Sentinel Small i.e., Sentinel Small and Columbia Acorn go up and down completely randomly.

Pair Corralation between Sentinel Small and Columbia Acorn

Assuming the 90 days horizon Sentinel Small Pany is expected to generate 0.83 times more return on investment than Columbia Acorn. However, Sentinel Small Pany is 1.2 times less risky than Columbia Acorn. It trades about 0.04 of its potential returns per unit of risk. Columbia Acorn Usa is currently generating about 0.02 per unit of risk. If you would invest  584.00  in Sentinel Small Pany on October 14, 2024 and sell it today you would earn a total of  113.00  from holding Sentinel Small Pany or generate 19.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	13.1%
Values	Daily Returns

Sentinel Small Pany  vs.  Columbia Acorn Usa

Sentinel Small Pany

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Acorn Usa

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sentinel Small and Columbia Acorn

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

The idea behind Sentinel Small Pany and Columbia Acorn Usa 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.