Correlation Between Columbia Small and Nova Fund

Can any of the company-specific risk be diversified away by investing in both Columbia Small and Nova Fund 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 Nova Fund 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 Nova Fund Class, you can compare the effects of market volatilities on Columbia Small and Nova Fund 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 Nova Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Small and Nova Fund.

Diversification Opportunities for Columbia Small and Nova Fund

0.78

Correlation Coefficient

Columbia Small  Nova Fund

Poor diversification

The 3 months correlation between Columbia and Nova is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Small Cap and Nova Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Fund Class 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 Nova Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Fund Class has no effect on the direction of Columbia Small i.e., Columbia Small and Nova Fund go up and down completely randomly.

Pair Corralation between Columbia Small and Nova Fund

Assuming the 90 days horizon Columbia Small is expected to generate 2.2 times less return on investment than Nova Fund. In addition to that, Columbia Small is 1.04 times more volatile than Nova Fund Class. It trades about 0.1 of its total potential returns per unit of risk. Nova Fund Class is currently generating about 0.23 per unit of volatility. If you would invest  11,936  in Nova Fund Class on May 6, 2025 and sell it today you would earn a total of  1,984  from holding Nova Fund Class or generate 16.62% return on investment over 90 days.

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

Columbia Small Cap  vs.  Nova Fund Class

Columbia Small Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Small Cap are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Columbia Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Nova Fund Class

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nova Fund Class are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Nova Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Columbia Small and Nova Fund

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

The idea behind Columbia Small Cap and Nova Fund Class 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.