Correlation Between Omni Small-cap and Columbia Select

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

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

Diversification Opportunities for Omni Small-cap and Columbia Select

0.98

Correlation Coefficient

Omni Small-cap  Columbia Select

Almost no diversification

The 3 months correlation between Omni and Columbia is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Omni Small Cap Value and Columbia Select Smaller Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Select Smaller and Omni Small-cap 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 Omni Small Cap Value 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 Smaller has no effect on the direction of Omni Small-cap i.e., Omni Small-cap and Columbia Select go up and down completely randomly.

Pair Corralation between Omni Small-cap and Columbia Select

Assuming the 90 days horizon Omni Small-cap is expected to generate 1.17 times less return on investment than Columbia Select. In addition to that, Omni Small-cap is 1.22 times more volatile than Columbia Select Smaller Cap. It trades about 0.12 of its total potential returns per unit of risk. Columbia Select Smaller Cap is currently generating about 0.17 per unit of volatility. If you would invest  2,015  in Columbia Select Smaller Cap on September 5, 2024 and sell it today you would earn a total of  260.00  from holding Columbia Select Smaller Cap or generate 12.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Omni Small Cap Value  vs.  Columbia Select Smaller Cap

Omni Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Omni Small Cap Value are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Omni Small-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Columbia Select Smaller

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Select Smaller Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. 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 Omni Small-cap and Columbia Select

The main advantage of trading using opposite Omni Small-cap and Columbia Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Omni Small-cap 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 Omni Small Cap Value and Columbia Select Smaller 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.