Correlation Between Chestnut Street and Columbia Moderate

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

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

Diversification Opportunities for Chestnut Street and Columbia Moderate

0.88

Correlation Coefficient

Chestnut Street  Columbia Moderate

Very poor diversification

The 3 months correlation between Chestnut and Columbia is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and Columbia Moderate Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Moderate Growth and Chestnut Street 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 Chestnut Street Exchange are associated (or correlated) with Columbia Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Moderate Growth has no effect on the direction of Chestnut Street i.e., Chestnut Street and Columbia Moderate go up and down completely randomly.

Pair Corralation between Chestnut Street and Columbia Moderate

Assuming the 90 days horizon Chestnut Street Exchange is expected to generate 1.34 times more return on investment than Columbia Moderate. However, Chestnut Street is 1.34 times more volatile than Columbia Moderate Growth. It trades about 0.17 of its potential returns per unit of risk. Columbia Moderate Growth is currently generating about 0.14 per unit of risk. If you would invest  110,001  in Chestnut Street Exchange on September 13, 2024 and sell it today you would earn a total of  7,108  from holding Chestnut Street Exchange or generate 6.46% return on investment over 90 days.

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

Chestnut Street Exchange  vs.  Columbia Moderate Growth

Chestnut Street Exchange

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chestnut Street Exchange are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Chestnut Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Columbia Moderate Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Moderate Growth are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Chestnut Street and Columbia Moderate

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

The idea behind Chestnut Street Exchange and Columbia Moderate Growth 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.