Correlation Between Dow Jones and Columbia Mid
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Columbia Mid 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 Mid 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 Mid Cap, you can compare the effects of market volatilities on Dow Jones and Columbia Mid 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 Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Columbia Mid.
Diversification Opportunities for Dow Jones and Columbia Mid
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Columbia is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Columbia Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Mid 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 Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Mid Cap has no effect on the direction of Dow Jones i.e., Dow Jones and Columbia Mid go up and down completely randomly.
Pair Corralation between Dow Jones and Columbia Mid
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.7 times more return on investment than Columbia Mid. However, Dow Jones Industrial is 1.43 times less risky than Columbia Mid. It trades about -0.22 of its potential returns per unit of risk. Columbia Mid Cap is currently generating about -0.24 per unit of risk. If you would invest 4,471,358 in Dow Jones Industrial on November 27, 2024 and sell it today you would lose (125,237) from holding Dow Jones Industrial or give up 2.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Columbia Mid Cap
Performance |
| Timeline |
Dow Jones and Columbia Mid Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Columbia Mid Cap
Pair trading matchups for Columbia Mid
Pair Trading with Dow Jones and Columbia Mid
The main advantage of trading using opposite Dow Jones and Columbia Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Columbia Mid 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 Mid will offset losses from the drop in Columbia Mid's long position.The idea behind Dow Jones Industrial and Columbia Mid 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.| Columbia Mid vs. Health Care Fund | Columbia Mid vs. Lord Abbett Health | Columbia Mid vs. Eaton Vance Worldwide | Columbia Mid vs. Eventide Healthcare Life |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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