Correlation Between FlexShares Morningstar and Columbia

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

By analyzing existing cross correlation between FlexShares Morningstar Emerging and Columbia EM Core, you can compare the effects of market volatilities on FlexShares Morningstar and Columbia 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 FlexShares Morningstar with a short position of Columbia. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Morningstar and Columbia.

Diversification Opportunities for FlexShares Morningstar and Columbia

0.69

Correlation Coefficient

FlexShares Morningstar  Columbia

Poor diversification

The 3 months correlation between FlexShares and Columbia is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Morningstar Emergin and Columbia EM Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia EM Core and FlexShares Morningstar 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 FlexShares Morningstar Emerging are associated (or correlated) with Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia EM Core has no effect on the direction of FlexShares Morningstar i.e., FlexShares Morningstar and Columbia go up and down completely randomly.

Pair Corralation between FlexShares Morningstar and Columbia

Given the investment horizon of 90 days FlexShares Morningstar Emerging is expected to generate 1.0 times more return on investment than Columbia. However, FlexShares Morningstar Emerging is 1.0 times less risky than Columbia. It trades about -0.01 of its potential returns per unit of risk. Columbia EM Core is currently generating about -0.05 per unit of risk. If you would invest  5,220  in FlexShares Morningstar Emerging on December 1, 2024 and sell it today you would lose (46.00) from holding FlexShares Morningstar Emerging or give up 0.88% of portfolio value over 90 days.

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

FlexShares Morningstar Emergin  vs.  Columbia EM Core

FlexShares Morningstar

Risk-Adjusted Performance

Very Weak

Over the last 90 days FlexShares Morningstar Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FlexShares Morningstar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Columbia EM Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia EM Core has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Columbia is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FlexShares Morningstar and Columbia

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

The idea behind FlexShares Morningstar Emerging and Columbia EM Core 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.