Correlation Between Small Cap and Columbia Growth
Can any of the company-specific risk be diversified away by investing in both Small Cap and Columbia Growth 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 Small Cap and Columbia Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Columbia Growth 529, you can compare the effects of market volatilities on Small Cap and Columbia Growth 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 Small Cap with a short position of Columbia Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Columbia Growth.
Diversification Opportunities for Small Cap and Columbia Growth
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Columbia is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Columbia Growth 529 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Growth 529 and Small Cap 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 Small Cap Stock are associated (or correlated) with Columbia Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Growth 529 has no effect on the direction of Small Cap i.e., Small Cap and Columbia Growth go up and down completely randomly.
Pair Corralation between Small Cap and Columbia Growth
Assuming the 90 days horizon Small Cap Stock is expected to under-perform the Columbia Growth. In addition to that, Small Cap is 1.65 times more volatile than Columbia Growth 529. It trades about -0.24 of its total potential returns per unit of risk. Columbia Growth 529 is currently generating about -0.07 per unit of volatility. If you would invest 6,358 in Columbia Growth 529 on December 5, 2024 and sell it today you would lose (212.00) from holding Columbia Growth 529 or give up 3.33% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.33% |
Values | Daily Returns |
Small Cap Stock vs. Columbia Growth 529
Performance |
Timeline |
Small Cap Stock |
Columbia Growth 529 |
Small Cap and Columbia Growth Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Cap and Columbia Growth
The main advantage of trading using opposite Small Cap and Columbia Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Columbia Growth 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 Growth will offset losses from the drop in Columbia Growth's long position.Small Cap vs. Tax Free Conservative Income | Small Cap vs. Prudential Core Conservative | Small Cap vs. Stone Ridge Diversified | Small Cap vs. Harbor Diversified International |
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Check out your portfolio center.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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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