Correlation Between Dow Jones and Columbia Small
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Columbia Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Columbia Small Cap, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Columbia Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Columbia Small.
Diversification Opportunities for Dow Jones and Columbia Small
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dow and Columbia is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Columbia Small go up and down completely randomly.
Pair Corralation between Dow Jones and Columbia Small
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.54 times more return on investment than Columbia Small. However, Dow Jones Industrial is 1.87 times less risky than Columbia Small. It trades about 0.16 of its potential returns per unit of risk. Columbia Small Cap is currently generating about 0.07 per unit of risk. If you would invest 3,857,103 in Dow Jones Industrial on September 1, 2024 and sell it today you would earn a total of 633,962 from holding Dow Jones Industrial or generate 16.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Dow Jones Industrial vs. Columbia Small Cap
Performance |
| Timeline |
Dow Jones and Columbia Small Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Columbia Small Cap
Pair trading matchups for Columbia Small
Pair Trading with Dow Jones and Columbia Small
The main advantage of trading using opposite Dow Jones and Columbia Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Catalyst Pharmaceuticals | Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. National CineMedia | Dow Jones vs. Mink Therapeutics |
| Columbia Small vs. Columbia Porate Income | Columbia Small vs. Columbia Ultra Short | Columbia Small vs. Columbia Ultra Short | Columbia Small vs. Columbia Treasury Index |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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