Correlation Between Short Oil and Columbia Dividend

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

By analyzing existing cross correlation between Short Oil Gas and Columbia Dividend Income, you can compare the effects of market volatilities on Short Oil and Columbia Dividend 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 Short Oil with a short position of Columbia Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Oil and Columbia Dividend.

Diversification Opportunities for Short Oil and Columbia Dividend

-0.79

Correlation Coefficient

Short Oil  Columbia Dividend

Pay attention - limited upside

The 3 months correlation between Short and Columbia is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Short Oil Gas and Columbia Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Dividend Income and Short Oil 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 Short Oil Gas are associated (or correlated) with Columbia Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Dividend Income has no effect on the direction of Short Oil i.e., Short Oil and Columbia Dividend go up and down completely randomly.

Pair Corralation between Short Oil and Columbia Dividend

Assuming the 90 days horizon Short Oil Gas is expected to under-perform the Columbia Dividend. In addition to that, Short Oil is 1.34 times more volatile than Columbia Dividend Income. It trades about -0.48 of its total potential returns per unit of risk. Columbia Dividend Income is currently generating about 0.17 per unit of volatility. If you would invest  3,340  in Columbia Dividend Income on October 25, 2024 and sell it today you would earn a total of  68.00  from holding Columbia Dividend Income or generate 2.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Short Oil Gas  vs.  Columbia Dividend Income

Short Oil Gas

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Dividend Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Dividend Income 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.

Pair Trading with Short Oil and Columbia Dividend

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

The idea behind Short Oil Gas and Columbia Dividend Income 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.