Correlation Between Vanguard Value and Columbia Select

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

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

Diversification Opportunities for Vanguard Value and Columbia Select

0.56

Correlation Coefficient

Vanguard Value  Columbia Select

Very weak diversification

The 3 months correlation between Vanguard and Columbia is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Value Index and Columbia Select Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Large and Vanguard Value 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 Value Index 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 Large has no effect on the direction of Vanguard Value i.e., Vanguard Value and Columbia Select go up and down completely randomly.

Pair Corralation between Vanguard Value and Columbia Select

Assuming the 90 days horizon Vanguard Value Index is expected to generate 0.89 times more return on investment than Columbia Select. However, Vanguard Value Index is 1.13 times less risky than Columbia Select. It trades about 0.09 of its potential returns per unit of risk. Columbia Select Large Cap is currently generating about 0.06 per unit of risk. If you would invest  5,201  in Vanguard Value Index on September 12, 2024 and sell it today you would earn a total of  1,712  from holding Vanguard Value Index or generate 32.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.18%
Values	Daily Returns

Vanguard Value Index  vs.  Columbia Select Large Cap

Vanguard Value Index

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Value Index are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Select Large

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Columbia Select Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Columbia Select may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard Value and Columbia Select

The main advantage of trading using opposite Vanguard Value and Columbia Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Value 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 Vanguard Value Index and Columbia Select Large 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.