Correlation Between Tekla Healthcare and Columbia Diversified

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

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

Diversification Opportunities for Tekla Healthcare and Columbia Diversified

-0.48

Correlation Coefficient

Tekla Healthcare  Columbia Diversified

Very good diversification

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

Pair Corralation between Tekla Healthcare and Columbia Diversified

Considering the 90-day investment horizon Tekla Healthcare Opportunities is expected to under-perform the Columbia Diversified. In addition to that, Tekla Healthcare is 3.12 times more volatile than Columbia Diversified Equity. It trades about -0.14 of its total potential returns per unit of risk. Columbia Diversified Equity is currently generating about -0.09 per unit of volatility. If you would invest  1,859  in Columbia Diversified Equity on September 12, 2024 and sell it today you would lose (18.00) from holding Columbia Diversified Equity or give up 0.97% of portfolio value over 90 days.

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

Tekla Healthcare Opportunities  vs.  Columbia Diversified Equity

Tekla Healthcare Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Healthcare Opportunities has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable technical indicators, Tekla Healthcare is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Columbia Diversified

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Diversified Equity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tekla Healthcare and Columbia Diversified

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

The idea behind Tekla Healthcare Opportunities and Columbia Diversified Equity 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.