Correlation Between Prudential Qma and Columbia Select

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

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

Diversification Opportunities for Prudential Qma and Columbia Select

0.96

Correlation Coefficient

Prudential Qma  Columbia Select

Almost no diversification

The 3 months correlation between Prudential and Columbia is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Qma Mid Cap and Columbia Select Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Large and Prudential Qma 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 Prudential Qma Mid Cap 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 Large has no effect on the direction of Prudential Qma i.e., Prudential Qma and Columbia Select go up and down completely randomly.

Pair Corralation between Prudential Qma and Columbia Select

Assuming the 90 days horizon Prudential Qma Mid Cap is expected to generate 1.19 times more return on investment than Columbia Select. However, Prudential Qma is 1.19 times more volatile than Columbia Select Large Cap. It trades about 0.16 of its potential returns per unit of risk. Columbia Select Large Cap is currently generating about 0.14 per unit of risk. If you would invest  2,485  in Prudential Qma Mid Cap on September 3, 2024 and sell it today you would earn a total of  203.00  from holding Prudential Qma Mid Cap or generate 8.17% return on investment over 90 days.

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

Prudential Qma Mid Cap  vs.  Columbia Select Large Cap

Prudential Qma Mid

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Qma Mid Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Prudential Qma may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Columbia Select Large

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Select Large Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Columbia Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prudential Qma and Columbia Select

The main advantage of trading using opposite Prudential Qma and Columbia Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Qma 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 Prudential Qma Mid Cap and Columbia Select 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.

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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.