Correlation Between Vanguard Small and Columbia Moderate

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

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

Diversification Opportunities for Vanguard Small and Columbia Moderate

0.79

Correlation Coefficient

Vanguard Small  Columbia Moderate

Poor diversification

The 3 months correlation between Vanguard and Columbia is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Index and Columbia Moderate 529 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Moderate 529 and Vanguard Small 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 Vanguard Small Cap Index are associated (or correlated) with Columbia Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Moderate 529 has no effect on the direction of Vanguard Small i.e., Vanguard Small and Columbia Moderate go up and down completely randomly.

Pair Corralation between Vanguard Small and Columbia Moderate

Assuming the 90 days horizon Vanguard Small Cap Index is expected to under-perform the Columbia Moderate. In addition to that, Vanguard Small is 2.02 times more volatile than Columbia Moderate 529. It trades about -0.23 of its total potential returns per unit of risk. Columbia Moderate 529 is currently generating about -0.12 per unit of volatility. 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

Vanguard Small Cap Index  vs.  Columbia Moderate 529

Vanguard Small Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Index are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Vanguard Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Vanguard Small and Columbia Moderate

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

The idea behind Vanguard Small Cap Index and Columbia Moderate 529 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.