Correlation Between Columbia Seligman and BlackRock Capital

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

By analyzing existing cross correlation between Columbia Seligman Premium and BlackRock Capital Allocation, you can compare the effects of market volatilities on Columbia Seligman and BlackRock Capital 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 Seligman with a short position of BlackRock Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Seligman and BlackRock Capital.

Diversification Opportunities for Columbia Seligman and BlackRock Capital

0.3

Correlation Coefficient

Columbia Seligman  BlackRock Capital

Weak diversification

The 3 months correlation between Columbia and BlackRock is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Seligman Premium and BlackRock Capital Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock Capital and Columbia Seligman 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 Seligman Premium are associated (or correlated) with BlackRock Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock Capital has no effect on the direction of Columbia Seligman i.e., Columbia Seligman and BlackRock Capital go up and down completely randomly.

Pair Corralation between Columbia Seligman and BlackRock Capital

Considering the 90-day investment horizon Columbia Seligman Premium is expected to generate 1.63 times more return on investment than BlackRock Capital. However, Columbia Seligman is 1.63 times more volatile than BlackRock Capital Allocation. It trades about 0.04 of its potential returns per unit of risk. BlackRock Capital Allocation is currently generating about -0.02 per unit of risk. If you would invest  3,065  in Columbia Seligman Premium on November 29, 2024 and sell it today you would earn a total of  68.00  from holding Columbia Seligman Premium or generate 2.22% return on investment over 90 days.

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

Columbia Seligman Premium  vs.  BlackRock Capital Allocation

Columbia Seligman Premium

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Seligman Premium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Columbia Seligman is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

BlackRock Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock Capital Allocation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, BlackRock Capital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Columbia Seligman and BlackRock Capital

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

The idea behind Columbia Seligman Premium and BlackRock Capital Allocation 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.