Correlation Between Columbia Sportswear and AEON STORES
Can any of the company-specific risk be diversified away by investing in both Columbia Sportswear and AEON STORES 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 Columbia Sportswear and AEON STORES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Sportswear and AEON STORES, you can compare the effects of market volatilities on Columbia Sportswear and AEON STORES 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 Columbia Sportswear with a short position of AEON STORES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Sportswear and AEON STORES.
Diversification Opportunities for Columbia Sportswear and AEON STORES
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Columbia and AEON is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and AEON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEON STORES and Columbia Sportswear 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 Columbia Sportswear are associated (or correlated) with AEON STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEON STORES has no effect on the direction of Columbia Sportswear i.e., Columbia Sportswear and AEON STORES go up and down completely randomly.
Pair Corralation between Columbia Sportswear and AEON STORES
Assuming the 90 days horizon Columbia Sportswear is expected to generate 0.58 times more return on investment than AEON STORES. However, Columbia Sportswear is 1.73 times less risky than AEON STORES. It trades about 0.01 of its potential returns per unit of risk. AEON STORES is currently generating about 0.0 per unit of risk. If you would invest 8,131 in Columbia Sportswear on September 3, 2024 and sell it today you would earn a total of 69.00 from holding Columbia Sportswear or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Columbia Sportswear vs. AEON STORES
Performance |
| Timeline |
| Columbia Sportswear |
| AEON STORES |
Columbia Sportswear and AEON STORES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Columbia Sportswear and AEON STORES
The main advantage of trading using opposite Columbia Sportswear and AEON STORES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Sportswear position performs unexpectedly, AEON STORES 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 AEON STORES will offset losses from the drop in AEON STORES's long position.The idea behind Columbia Sportswear and AEON STORES 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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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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