Correlation Between Columbia Real and Emerging Economies

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

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

Diversification Opportunities for Columbia Real and Emerging Economies

-0.08

Correlation Coefficient

Columbia Real  Emerging Economies

Good diversification

The 3 months correlation between COLUMBIA and Emerging is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Real Estate and Emerging Economies Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Economies and Columbia Real 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 Real Estate are associated (or correlated) with Emerging Economies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Economies has no effect on the direction of Columbia Real i.e., Columbia Real and Emerging Economies go up and down completely randomly.

Pair Corralation between Columbia Real and Emerging Economies

Assuming the 90 days horizon Columbia Real Estate is expected to generate 0.97 times more return on investment than Emerging Economies. However, Columbia Real Estate is 1.03 times less risky than Emerging Economies. It trades about 0.05 of its potential returns per unit of risk. Emerging Economies Fund is currently generating about 0.04 per unit of risk. If you would invest  1,098  in Columbia Real Estate on September 5, 2024 and sell it today you would earn a total of  27.00  from holding Columbia Real Estate or generate 2.46% return on investment over 90 days.

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

Columbia Real Estate  vs.  Emerging Economies Fund

Columbia Real Estate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Real Estate are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Columbia Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerging Economies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Emerging Economies Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Emerging Economies 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 Real and Emerging Economies

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

The idea behind Columbia Real Estate and Emerging Economies Fund 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .