Correlation Between Columbia Banking and Banner

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

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

Diversification Opportunities for Columbia Banking and Banner

0.98

Correlation Coefficient

Columbia Banking  Banner

Almost no diversification

The 3 months correlation between Columbia and Banner is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Banking System and Banner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banner and Columbia Banking 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 Banking System are associated (or correlated) with Banner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banner has no effect on the direction of Columbia Banking i.e., Columbia Banking and Banner go up and down completely randomly.

Pair Corralation between Columbia Banking and Banner

Given the investment horizon of 90 days Columbia Banking is expected to generate 1.1 times less return on investment than Banner. But when comparing it to its historical volatility, Columbia Banking System is 1.09 times less risky than Banner. It trades about 0.18 of its potential returns per unit of risk. Banner is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  5,558  in Banner on September 12, 2024 and sell it today you would earn a total of  1,768  from holding Banner or generate 31.81% return on investment over 90 days.

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

Columbia Banking System  vs.  Banner

Columbia Banking System

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Banking System are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent essential indicators, Columbia Banking sustained solid returns over the last few months and may actually be approaching a breakup point.

Banner

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banner are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Banner reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Columbia Banking and Banner

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

The idea behind Columbia Banking System and Banner 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.