Correlation Between Small Cap and Columbia
Can any of the company-specific risk be diversified away by investing in both Small Cap and Columbia 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 Small Cap and Columbia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Columbia Government Mortgage, you can compare the effects of market volatilities on Small Cap and Columbia 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 Small Cap with a short position of Columbia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Columbia.
Diversification Opportunities for Small Cap and Columbia
Poor diversification
The 3 months correlation between Small and Columbia is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Columbia Government Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Government and Small Cap 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 Small Cap Equity are associated (or correlated) with Columbia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Government has no effect on the direction of Small Cap i.e., Small Cap and Columbia go up and down completely randomly.
Pair Corralation between Small Cap and Columbia
Assuming the 90 days horizon Small Cap Equity is expected to under-perform the Columbia. In addition to that, Small Cap is 2.37 times more volatile than Columbia Government Mortgage. It trades about -0.27 of its total potential returns per unit of risk. Columbia Government Mortgage is currently generating about 0.15 per unit of volatility. If you would invest 1,758 in Columbia Government Mortgage on November 27, 2024 and sell it today you would earn a total of 22.00 from holding Columbia Government Mortgage or generate 1.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Columbia Government Mortgage
Performance |
| Timeline |
| Small Cap Equity |
| Columbia Government |
Small Cap and Columbia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Columbia
The main advantage of trading using opposite Small Cap and Columbia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Columbia 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 will offset losses from the drop in Columbia's long position.| Small Cap vs. Growth Allocation Fund | Small Cap vs. Defensive Market Strategies | Small Cap vs. Defensive Market Strategies | Small Cap vs. Value Equity Institutional |
| Columbia vs. Virtus High Yield | Columbia vs. Gmo High Yield | Columbia vs. Mesirow Financial High | Columbia vs. Goldman Sachs High |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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