Correlation Between Wasatch Small and Columbia Minnesota

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

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

Diversification Opportunities for Wasatch Small and Columbia Minnesota

0.06

Correlation Coefficient

Wasatch Small  Columbia Minnesota

Significant diversification

The 3 months correlation between Wasatch and Columbia is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Columbia Minnesota Tax Exempt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Minnesota Tax and Wasatch 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 Wasatch Small Cap are associated (or correlated) with Columbia Minnesota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Minnesota Tax has no effect on the direction of Wasatch Small i.e., Wasatch Small and Columbia Minnesota go up and down completely randomly.

Pair Corralation between Wasatch Small and Columbia Minnesota

Assuming the 90 days horizon Wasatch Small Cap is expected to under-perform the Columbia Minnesota. In addition to that, Wasatch Small is 7.34 times more volatile than Columbia Minnesota Tax Exempt. It trades about -0.05 of its total potential returns per unit of risk. Columbia Minnesota Tax Exempt is currently generating about 0.0 per unit of volatility. If you would invest  1,992  in Columbia Minnesota Tax Exempt on September 14, 2024 and sell it today you would lose (2.00) from holding Columbia Minnesota Tax Exempt or give up 0.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Wasatch Small Cap  vs.  Columbia Minnesota Tax Exempt

Wasatch Small Cap

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Wasatch Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Columbia Minnesota Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Minnesota Tax Exempt has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Columbia Minnesota is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wasatch Small and Columbia Minnesota

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

The idea behind Wasatch Small Cap and Columbia Minnesota Tax Exempt 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.