Correlation Between Stone Ridge and Columbia

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

By analyzing existing cross correlation between Stone Ridge Diversified and Columbia Treasury Index, you can compare the effects of market volatilities on Stone Ridge and Columbia 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 Stone Ridge with a short position of Columbia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Columbia.

Diversification Opportunities for Stone Ridge and Columbia

-0.48

Correlation Coefficient

Stone Ridge  Columbia

Very good diversification

The 3 months correlation between Stone and Columbia is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and Columbia Treasury Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Treasury Index and Stone Ridge 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 Stone Ridge Diversified are associated (or correlated) with Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Treasury Index has no effect on the direction of Stone Ridge i.e., Stone Ridge and Columbia go up and down completely randomly.

Pair Corralation between Stone Ridge and Columbia

Assuming the 90 days horizon Stone Ridge is expected to generate 5.17 times less return on investment than Columbia. But when comparing it to its historical volatility, Stone Ridge Diversified is 1.46 times less risky than Columbia. It trades about 0.05 of its potential returns per unit of risk. Columbia Treasury Index is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  964.00  in Columbia Treasury Index on December 21, 2024 and sell it today you would earn a total of  29.00  from holding Columbia Treasury Index or generate 3.01% return on investment over 90 days.

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

Stone Ridge Diversified  vs.  Columbia Treasury Index

Stone Ridge Diversified

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge Diversified are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Stone Ridge is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Treasury Index

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Treasury Index are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stone Ridge and Columbia

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

The idea behind Stone Ridge Diversified and Columbia Treasury Index 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.