Correlation Between Columbia Income and Columbia Thermostat

Can any of the company-specific risk be diversified away by investing in both Columbia Income and Columbia Thermostat 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 Income and Columbia Thermostat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Columbia Income Builder and Columbia Thermostat Fund, you can compare the effects of market volatilities on Columbia Income and Columbia Thermostat 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 Income with a short position of Columbia Thermostat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Income and Columbia Thermostat.

Diversification Opportunities for Columbia Income and Columbia Thermostat

0.87

Correlation Coefficient

Columbia Income  Columbia Thermostat

Very poor diversification

The 3 months correlation between Columbia and Columbia is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Income Builder and Columbia Thermostat Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Thermostat and Columbia Income 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 Income Builder are associated (or correlated) with Columbia Thermostat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Thermostat has no effect on the direction of Columbia Income i.e., Columbia Income and Columbia Thermostat go up and down completely randomly.

Pair Corralation between Columbia Income and Columbia Thermostat

Assuming the 90 days horizon Columbia Income Builder is expected to under-perform the Columbia Thermostat. But the mutual fund apears to be less risky and, when comparing its historical volatility, Columbia Income Builder is 1.01 times less risky than Columbia Thermostat. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Columbia Thermostat Fund is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  1,552  in Columbia Thermostat Fund on January 31, 2024 and sell it today you would lose (25.00) from holding Columbia Thermostat Fund or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Columbia Income Builder  vs.  Columbia Thermostat Fund

Columbia Me Builder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Income Builder has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Thermostat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Thermostat Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia Thermostat is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Columbia Income and Columbia Thermostat

The main advantage of trading using opposite Columbia Income and Columbia Thermostat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Income position performs unexpectedly, Columbia Thermostat 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 Thermostat will offset losses from the drop in Columbia Thermostat's long position.

The idea behind Columbia Income Builder and Columbia Thermostat Fund 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.