Correlation Between Multi-manager Directional and Columbia Ultra
Can any of the company-specific risk be diversified away by investing in both Multi-manager Directional and Columbia Ultra 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 Multi-manager Directional and Columbia Ultra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multi Manager Directional Alternative and Columbia Ultra Short, you can compare the effects of market volatilities on Multi-manager Directional and Columbia Ultra 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 Multi-manager Directional with a short position of Columbia Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi-manager Directional and Columbia Ultra.
Diversification Opportunities for Multi-manager Directional and Columbia Ultra
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Multi-manager and Columbia is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager Directional Alte and Columbia Ultra Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Ultra Short and Multi-manager Directional 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 Multi Manager Directional Alternative are associated (or correlated) with Columbia Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Ultra Short has no effect on the direction of Multi-manager Directional i.e., Multi-manager Directional and Columbia Ultra go up and down completely randomly.
Pair Corralation between Multi-manager Directional and Columbia Ultra
Assuming the 90 days horizon Multi Manager Directional Alternative is expected to generate 5.89 times more return on investment than Columbia Ultra. However, Multi-manager Directional is 5.89 times more volatile than Columbia Ultra Short. It trades about 0.16 of its potential returns per unit of risk. Columbia Ultra Short is currently generating about 0.24 per unit of risk. If you would invest 709.00 in Multi Manager Directional Alternative on September 1, 2024 and sell it today you would earn a total of 121.00 from holding Multi Manager Directional Alternative or generate 17.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multi Manager Directional Alte vs. Columbia Ultra Short
Performance |
| Timeline |
| Multi-manager Directional |
| Columbia Ultra Short |
Multi-manager Directional and Columbia Ultra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multi-manager Directional and Columbia Ultra
The main advantage of trading using opposite Multi-manager Directional and Columbia Ultra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi-manager Directional position performs unexpectedly, Columbia Ultra 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 Ultra will offset losses from the drop in Columbia Ultra's long position.The idea behind Multi Manager Directional Alternative and Columbia Ultra Short 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.
| Columbia Ultra vs. Columbia Porate Income | Columbia Ultra vs. Columbia Treasury Index | Columbia Ultra vs. Multi Manager Directional Alternative | Columbia Ultra vs. Columbia Small Cap |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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