Correlation Between American Funds and Columbia Diversified
Can any of the company-specific risk be diversified away by investing in both American Funds and Columbia Diversified 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 Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Retirement and Columbia Diversified Equity, you can compare the effects of market volatilities on American Funds and Columbia Diversified 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 Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Columbia Diversified.
Diversification Opportunities for American Funds and Columbia Diversified
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Columbia is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Columbia Diversified Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Diversified 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 Retirement are associated (or correlated) with Columbia Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Diversified has no effect on the direction of American Funds i.e., American Funds and Columbia Diversified go up and down completely randomly.
Pair Corralation between American Funds and Columbia Diversified
Assuming the 90 days horizon American Funds is expected to generate 9.17 times less return on investment than Columbia Diversified. But when comparing it to its historical volatility, American Funds Retirement is 2.05 times less risky than Columbia Diversified. It trades about 0.06 of its potential returns per unit of risk. Columbia Diversified Equity is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,793 in Columbia Diversified Equity on August 30, 2024 and sell it today you would earn a total of 84.00 from holding Columbia Diversified Equity or generate 4.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Funds Retirement vs. Columbia Diversified Equity
Performance |
| Timeline |
| American Funds Retirement |
| Columbia Diversified |
American Funds and Columbia Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Columbia Diversified
The main advantage of trading using opposite American Funds and Columbia Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Columbia Diversified 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 Diversified will offset losses from the drop in Columbia Diversified'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 Diversified vs. American Funds Retirement | Columbia Diversified vs. Saat Moderate Strategy | Columbia Diversified vs. Pro Blend Moderate Term | Columbia Diversified vs. Franklin Moderate Allocation |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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