Correlation Between Stellar and Columbia

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

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

Diversification Opportunities for Stellar and Columbia

-0.23

Correlation Coefficient

Stellar  Columbia

Very good diversification

The 3 months correlation between Stellar and Columbia is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Stellar and Columbia Government Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Government and Stellar 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 Stellar are associated (or correlated) with Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Government has no effect on the direction of Stellar i.e., Stellar and Columbia go up and down completely randomly.

Pair Corralation between Stellar and Columbia

Assuming the 90 days trading horizon Stellar is expected to generate 27.86 times more return on investment than Columbia. However, Stellar is 27.86 times more volatile than Columbia Government Mortgage. It trades about 0.25 of its potential returns per unit of risk. Columbia Government Mortgage is currently generating about -0.03 per unit of risk. If you would invest  9.41  in Stellar on October 25, 2024 and sell it today you would earn a total of  33.59  from holding Stellar or generate 356.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Stellar  vs.  Columbia Government Mortgage

Stellar

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar exhibited solid returns over the last few months and may actually be approaching a breakup point.

Columbia Government

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Stellar and Columbia

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

The idea behind Stellar and Columbia Government Mortgage 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.