Correlation Between Columbia Floating and Columbia Limited

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

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

Diversification Opportunities for Columbia Floating and Columbia Limited

-0.51

Correlation Coefficient

Columbia Floating  Columbia Limited

Excellent diversification

The 3 months correlation between Columbia and Columbia is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Floating Rate and Columbia Limited Duration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Limited Duration and Columbia Floating 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 Columbia Floating Rate are associated (or correlated) with Columbia Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Limited Duration has no effect on the direction of Columbia Floating i.e., Columbia Floating and Columbia Limited go up and down completely randomly.

Pair Corralation between Columbia Floating and Columbia Limited

Assuming the 90 days horizon Columbia Floating Rate is expected to generate 0.82 times more return on investment than Columbia Limited. However, Columbia Floating Rate is 1.22 times less risky than Columbia Limited. It trades about 0.26 of its potential returns per unit of risk. Columbia Limited Duration is currently generating about 0.0 per unit of risk. If you would invest  3,300  in Columbia Floating Rate on September 5, 2024 and sell it today you would earn a total of  65.00  from holding Columbia Floating Rate or generate 1.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Columbia Floating Rate  vs.  Columbia Limited Duration

Columbia Floating Rate

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Floating Rate are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Floating is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Limited Duration

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Columbia Floating and Columbia Limited

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

The idea behind Columbia Floating Rate and Columbia Limited Duration 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.