Correlation Between American Funds and Columbia Growth
Can any of the company-specific risk be diversified away by investing in both American Funds and Columbia Growth 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 American Funds and Columbia Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Conservative and Columbia Growth 529, you can compare the effects of market volatilities on American Funds and Columbia Growth 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 American Funds with a short position of Columbia Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Columbia Growth.
Diversification Opportunities for American Funds and Columbia Growth
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and Columbia is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Conservative and Columbia Growth 529 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Growth 529 and American Funds 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 American Funds Conservative are associated (or correlated) with Columbia Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Growth 529 has no effect on the direction of American Funds i.e., American Funds and Columbia Growth go up and down completely randomly.
Pair Corralation between American Funds and Columbia Growth
Assuming the 90 days horizon American Funds is expected to generate 1.51 times less return on investment than Columbia Growth. But when comparing it to its historical volatility, American Funds Conservative is 1.89 times less risky than Columbia Growth. It trades about 0.16 of its potential returns per unit of risk. Columbia Growth 529 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 5,118 in Columbia Growth 529 on September 4, 2024 and sell it today you would earn a total of 1,222 from holding Columbia Growth 529 or generate 23.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Conservative vs. Columbia Growth 529
Performance |
| Timeline |
| American Funds Conse |
| Columbia Growth 529 |
American Funds and Columbia Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Columbia Growth
The main advantage of trading using opposite American Funds and Columbia Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Columbia Growth 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 Growth will offset losses from the drop in Columbia Growth's long position.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| Columbia Growth vs. Vanguard Total Stock | Columbia Growth vs. Vanguard 500 Index | Columbia Growth vs. Vanguard Total Stock | Columbia Growth vs. Vanguard Total Stock |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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