Correlation Between Wasatch Small and Columbia Small

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

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

Diversification Opportunities for Wasatch Small and Columbia Small

-0.46

Correlation Coefficient

Wasatch Small  Columbia Small

Very good diversification

The 3 months correlation between Wasatch and Columbia is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap and Columbia Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Small Cap and Wasatch 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 Wasatch Small Cap are associated (or correlated) with Columbia Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Small Cap has no effect on the direction of Wasatch Small i.e., Wasatch Small and Columbia Small go up and down completely randomly.

Pair Corralation between Wasatch Small and Columbia Small

Assuming the 90 days horizon Wasatch Small Cap is expected to under-perform the Columbia Small. In addition to that, Wasatch Small is 1.82 times more volatile than Columbia Small Cap. It trades about -0.1 of its total potential returns per unit of risk. Columbia Small Cap is currently generating about 0.16 per unit of volatility. If you would invest  5,353  in Columbia Small Cap on September 30, 2024 and sell it today you would earn a total of  439.00  from holding Columbia Small Cap or generate 8.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	65.63%
Values	Daily Returns

Wasatch Small Cap  vs.  Columbia Small Cap

Wasatch Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wasatch Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Columbia Small Cap

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Columbia Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Columbia Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wasatch Small and Columbia Small

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

The idea behind Wasatch Small Cap and Columbia Small Cap 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.