Correlation Between Columbia Moderate and Kennedy Capital

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

By analyzing existing cross correlation between Columbia Moderate 529 and Kennedy Capital Small, you can compare the effects of market volatilities on Columbia Moderate and Kennedy Capital 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 Moderate with a short position of Kennedy Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Moderate and Kennedy Capital.

Diversification Opportunities for Columbia Moderate and Kennedy Capital

0.71

Correlation Coefficient

Columbia Moderate  Kennedy Capital

Poor diversification

The 3 months correlation between Columbia and Kennedy is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Moderate 529 and Kennedy Capital Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kennedy Capital Small and Columbia Moderate 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 Moderate 529 are associated (or correlated) with Kennedy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kennedy Capital Small has no effect on the direction of Columbia Moderate i.e., Columbia Moderate and Kennedy Capital go up and down completely randomly.

Pair Corralation between Columbia Moderate and Kennedy Capital

Assuming the 90 days horizon Columbia Moderate 529 is expected to generate 0.4 times more return on investment than Kennedy Capital. However, Columbia Moderate 529 is 2.51 times less risky than Kennedy Capital. It trades about -0.12 of its potential returns per unit of risk. Kennedy Capital Small is currently generating about -0.37 per unit of risk. If you would invest  3,300  in Columbia Moderate 529 on September 22, 2024 and sell it today you would lose (48.00) from holding Columbia Moderate 529 or give up 1.45% of portfolio value over 90 days.

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

Columbia Moderate 529  vs.  Kennedy Capital Small

Columbia Moderate 529

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Moderate 529 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Columbia Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kennedy Capital Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kennedy Capital Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Kennedy Capital 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 Moderate and Kennedy Capital

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

The idea behind Columbia Moderate 529 and Kennedy Capital Small 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.