Correlation Between Smead Value and Columbia Large

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

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

Diversification Opportunities for Smead Value and Columbia Large

-0.57

Correlation Coefficient

Smead Value  Columbia Large

Excellent diversification

The 3 months correlation between Smead and Columbia is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Smead Value Fund and Columbia Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Large Cap and Smead Value 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 Smead Value Fund are associated (or correlated) with Columbia Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Large Cap has no effect on the direction of Smead Value i.e., Smead Value and Columbia Large go up and down completely randomly.

Pair Corralation between Smead Value and Columbia Large

Assuming the 90 days horizon Smead Value is expected to generate 2.05 times less return on investment than Columbia Large. In addition to that, Smead Value is 1.16 times more volatile than Columbia Large Cap. It trades about 0.04 of its total potential returns per unit of risk. Columbia Large Cap is currently generating about 0.1 per unit of volatility. If you would invest  2,001  in Columbia Large Cap on September 26, 2024 and sell it today you would earn a total of  986.00  from holding Columbia Large Cap or generate 49.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.17%
Values	Daily Returns

Smead Value Fund  vs.  Columbia Large Cap

Smead Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Large Cap

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Columbia Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak technical and fundamental indicators, Columbia Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Smead Value and Columbia Large

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

The idea behind Smead Value Fund and Columbia Large 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.