Correlation Between Columbia Corporate and Columbia Select

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

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

Diversification Opportunities for Columbia Corporate and Columbia Select

0.7

Correlation Coefficient

Columbia Corporate  Columbia Select

Poor diversification

The 3 months correlation between Columbia and Columbia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Corporate Income and Columbia Select Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Large and Columbia Corporate 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 Columbia Corporate Income 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 Columbia Corporate i.e., Columbia Corporate and Columbia Select go up and down completely randomly.

Pair Corralation between Columbia Corporate and Columbia Select

Assuming the 90 days horizon Columbia Corporate Income is expected to under-perform the Columbia Select. But the mutual fund apears to be less risky and, when comparing its historical volatility, Columbia Corporate Income is 4.4 times less risky than Columbia Select. The mutual fund trades about -0.27 of its potential returns per unit of risk. The Columbia Select Large is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  780.00  in Columbia Select Large on September 20, 2024 and sell it today you would earn a total of  301.00  from holding Columbia Select Large or generate 38.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	3.13%
Values	Daily Returns

Columbia Corporate Income  vs.  Columbia Select Large

Columbia Corporate Income

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Select Large

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Columbia Corporate and Columbia Select

The main advantage of trading using opposite Columbia Corporate and Columbia Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Corporate 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 Columbia Corporate Income and Columbia Select Large 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.