Correlation Between Columbia Select and Columbia Integrated

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

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

Diversification Opportunities for Columbia Select and Columbia Integrated

0.68

Correlation Coefficient

Columbia Select  Columbia Integrated

Poor diversification

The 3 months correlation between Columbia and Columbia is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Select Large Cap and Columbia Integrated Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Integrated Large and Columbia Select 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 Select Large Cap are associated (or correlated) with Columbia Integrated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Integrated Large has no effect on the direction of Columbia Select i.e., Columbia Select and Columbia Integrated go up and down completely randomly.

Pair Corralation between Columbia Select and Columbia Integrated

Assuming the 90 days horizon Columbia Select is expected to generate 2.19 times less return on investment than Columbia Integrated. But when comparing it to its historical volatility, Columbia Select Large Cap is 1.45 times less risky than Columbia Integrated. It trades about 0.06 of its potential returns per unit of risk. Columbia Integrated Large is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,365  in Columbia Integrated Large on December 2, 2024 and sell it today you would earn a total of  788.00  from holding Columbia Integrated Large or generate 57.73% return on investment over 90 days.

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

Columbia Select Large Cap  vs.  Columbia Integrated Large

Columbia Select Large

Risk-Adjusted Performance

Very Weak

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

Columbia Integrated Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Integrated Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward-looking indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Columbia Select and Columbia Integrated

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

The idea behind Columbia Select Large Cap and Columbia Integrated 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.