Correlation Between Vanguard Total and Columbia Growth

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

By analyzing existing cross correlation between Vanguard Total Stock and Columbia Growth 529, you can compare the effects of market volatilities on Vanguard Total 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 Vanguard Total with a short position of Columbia Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Total and Columbia Growth.

Diversification Opportunities for Vanguard Total and Columbia Growth

0.82

Correlation Coefficient

Vanguard Total  Columbia Growth

Very poor diversification

The 3 months correlation between Vanguard and Columbia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total 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 Vanguard 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 Vanguard Total 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 Vanguard Total i.e., Vanguard Total and Columbia Growth go up and down completely randomly.

Pair Corralation between Vanguard Total and Columbia Growth

Assuming the 90 days horizon Vanguard Total Stock is expected to under-perform the Columbia Growth. In addition to that, Vanguard Total is 1.17 times more volatile than Columbia Growth 529. It trades about -0.1 of its total potential returns per unit of risk. Columbia Growth 529 is currently generating about -0.11 per unit of volatility. If you would invest  5,248  in Columbia Growth 529 on September 30, 2024 and sell it today you would lose (93.00) from holding Columbia Growth 529 or give up 1.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Vanguard Total Stock  vs.  Columbia Growth 529

Vanguard Total Stock

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Growth 529

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Growth 529 are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Columbia Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and Columbia Growth

The main advantage of trading using opposite Vanguard Total and Columbia Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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.

The idea behind Vanguard Total Stock and Columbia Growth 529 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.