Correlation Between Columbia Small and Western Assets
Can any of the company-specific risk be diversified away by investing in both Columbia Small and Western Assets 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 Small and Western Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Small Cap and Western Assets Emerging, you can compare the effects of market volatilities on Columbia Small and Western Assets 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 Small with a short position of Western Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Small and Western Assets.
Diversification Opportunities for Columbia Small and Western Assets
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Columbia and Western is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Small Cap and Western Assets Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Assets Emerging and Columbia Small 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 Small Cap are associated (or correlated) with Western Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Assets Emerging has no effect on the direction of Columbia Small i.e., Columbia Small and Western Assets go up and down completely randomly.
Pair Corralation between Columbia Small and Western Assets
Assuming the 90 days horizon Columbia Small Cap is expected to generate 3.5 times more return on investment than Western Assets. However, Columbia Small is 3.5 times more volatile than Western Assets Emerging. It trades about 0.2 of its potential returns per unit of risk. Western Assets Emerging is currently generating about 0.17 per unit of risk. If you would invest 2,304 in Columbia Small Cap on October 24, 2024 and sell it today you would earn a total of 84.00 from holding Columbia Small Cap or generate 3.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Columbia Small Cap vs. Western Assets Emerging
Performance |
| Timeline |
| Columbia Small Cap |
| Western Assets Emerging |
Columbia Small and Western Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Columbia Small and Western Assets
The main advantage of trading using opposite Columbia Small and Western Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Small position performs unexpectedly, Western Assets 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 Western Assets will offset losses from the drop in Western Assets' long position.| Columbia Small vs. Lord Abbett Small | Columbia Small vs. Small Cap Growth Profund | Columbia Small vs. Applied Finance Explorer | Columbia Small vs. Ab Small Cap |
| Western Assets vs. Georgia Tax Free Bond | Western Assets vs. California Bond Fund | Western Assets vs. Nuveen High Yield | Western Assets vs. Leader Short Term Bond |
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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