Correlation Between Columbia India and IShares India

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

By analyzing existing cross correlation between Columbia India Consumer and iShares India 50, you can compare the effects of market volatilities on Columbia India and IShares India 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 India with a short position of IShares India. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia India and IShares India.

Diversification Opportunities for Columbia India and IShares India

0.97

Correlation Coefficient

Columbia India  IShares India

Almost no diversification

The 3 months correlation between Columbia and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Columbia India Consumer and iShares India 50 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares India 50 and Columbia India 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 India Consumer are associated (or correlated) with IShares India. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares India 50 has no effect on the direction of Columbia India i.e., Columbia India and IShares India go up and down completely randomly.

Pair Corralation between Columbia India and IShares India

Given the investment horizon of 90 days Columbia India Consumer is expected to under-perform the IShares India. In addition to that, Columbia India is 1.11 times more volatile than iShares India 50. It trades about -0.14 of its total potential returns per unit of risk. iShares India 50 is currently generating about -0.07 per unit of volatility. If you would invest  5,486  in iShares India 50 on September 3, 2024 and sell it today you would lose (198.00) from holding iShares India 50 or give up 3.61% of portfolio value over 90 days.

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

Columbia India Consumer  vs.  iShares India 50

Columbia India Consumer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia India Consumer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

iShares India 50

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares India 50 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, IShares India 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 India and IShares India

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

The idea behind Columbia India Consumer and iShares India 50 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.