Correlation Between Washington Mutual and Columbia Acorn

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

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

Diversification Opportunities for Washington Mutual and Columbia Acorn

-0.03

Correlation Coefficient

Washington Mutual  Columbia Acorn

Good diversification

The 3 months correlation between Washington and Columbia is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and Columbia Acorn Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Acorn and Washington Mutual 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 Washington Mutual Investors are associated (or correlated) with Columbia Acorn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Acorn has no effect on the direction of Washington Mutual i.e., Washington Mutual and Columbia Acorn go up and down completely randomly.

Pair Corralation between Washington Mutual and Columbia Acorn

Assuming the 90 days horizon Washington Mutual Investors is expected to under-perform the Columbia Acorn. But the mutual fund apears to be less risky and, when comparing its historical volatility, Washington Mutual Investors is 1.21 times less risky than Columbia Acorn. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Columbia Acorn Fund is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,333  in Columbia Acorn Fund on September 30, 2024 and sell it today you would earn a total of  101.00  from holding Columbia Acorn Fund or generate 7.58% return on investment over 90 days.

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

Washington Mutual Investors  vs.  Columbia Acorn Fund

Washington Mutual

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Washington Mutual Investors has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Washington Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Acorn

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Washington Mutual and Columbia Acorn

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

The idea behind Washington Mutual Investors and Columbia Acorn 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 Transaction History module to view history of all your transactions and understand their impact on performance.