Correlation Between Federated Total and Columbia Select

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

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

Diversification Opportunities for Federated Total and Columbia Select

0.35

Correlation Coefficient

Federated Total  Columbia Select

Weak diversification

The 3 months correlation between Federated and Columbia is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Federated Total Return and Columbia Select Smaller Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Smaller and Federated Total 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 Federated Total Return 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 Smaller has no effect on the direction of Federated Total i.e., Federated Total and Columbia Select go up and down completely randomly.

Pair Corralation between Federated Total and Columbia Select

Assuming the 90 days horizon Federated Total Return is expected to generate 0.29 times more return on investment than Columbia Select. However, Federated Total Return is 3.46 times less risky than Columbia Select. It trades about 0.01 of its potential returns per unit of risk. Columbia Select Smaller Cap is currently generating about 0.0 per unit of risk. If you would invest  914.00  in Federated Total Return on October 3, 2024 and sell it today you would earn a total of  21.00  from holding Federated Total Return or generate 2.3% return on investment over 90 days.

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

Federated Total Return  vs.  Columbia Select Smaller Cap

Federated Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

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

Columbia Select Smaller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Select Smaller Cap 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Federated Total and Columbia Select

The main advantage of trading using opposite Federated Total and Columbia Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Total 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 Federated Total Return and Columbia Select Smaller Cap 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .