Correlation Between Moncler SpA and Columbia Sportswear

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

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

Diversification Opportunities for Moncler SpA and Columbia Sportswear

-0.59

Correlation Coefficient

Moncler SpA  Columbia Sportswear

Excellent diversification

The 3 months correlation between Moncler and Columbia is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Moncler SpA and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear and Moncler SpA 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 Moncler SpA are associated (or correlated) with Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Moncler SpA i.e., Moncler SpA and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Moncler SpA and Columbia Sportswear

Assuming the 90 days horizon Moncler SpA is expected to under-perform the Columbia Sportswear. In addition to that, Moncler SpA is 1.36 times more volatile than Columbia Sportswear. It trades about -0.09 of its total potential returns per unit of risk. Columbia Sportswear is currently generating about 0.12 per unit of volatility. If you would invest  7,222  in Columbia Sportswear on September 3, 2024 and sell it today you would earn a total of  978.00  from holding Columbia Sportswear or generate 13.54% return on investment over 90 days.

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

Moncler SpA  vs.  Columbia Sportswear

Moncler SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moncler SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Columbia Sportswear

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Columbia Sportswear reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moncler SpA and Columbia Sportswear

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

The idea behind Moncler SpA and Columbia Sportswear 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.