Correlation Between Vanguard Small and Columbia India

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

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

Diversification Opportunities for Vanguard Small and Columbia India

0.31

Correlation Coefficient

Vanguard Small  Columbia India

Weak diversification

The 3 months correlation between Vanguard and Columbia is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Columbia India Consumer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia India Consumer and Vanguard Small 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 Vanguard Small Cap Index are associated (or correlated) with Columbia India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia India Consumer has no effect on the direction of Vanguard Small i.e., Vanguard Small and Columbia India go up and down completely randomly.

Pair Corralation between Vanguard Small and Columbia India

Allowing for the 90-day total investment horizon Vanguard Small Cap Index is expected to generate 1.02 times more return on investment than Columbia India. However, Vanguard Small is 1.02 times more volatile than Columbia India Consumer. It trades about -0.1 of its potential returns per unit of risk. Columbia India Consumer is currently generating about -0.11 per unit of risk. If you would invest  23,912  in Vanguard Small Cap Index on December 29, 2024 and sell it today you would lose (1,749) from holding Vanguard Small Cap Index or give up 7.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Vanguard Small Cap Index  vs.  Columbia India Consumer

Vanguard Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Small Cap Index has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Columbia India Consumer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia India Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Vanguard Small and Columbia India

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

The idea behind Vanguard Small Cap Index and Columbia India Consumer 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.