Can any of the company-specific risk be diversified away by investing in both Columbia Minnesota and Baron Health 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 Minnesota and Baron Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Minnesota Tax Exempt and Baron Health Care, you can compare the effects of market volatilities on Columbia Minnesota and Baron Health 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 Minnesota with a short position of Baron Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Minnesota and Baron Health.
Diversification Opportunities for Columbia Minnesota and Baron Health
The 3 months correlation between Columbia and Baron is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Minnesota Tax Exempt and Baron Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Health Care and Columbia Minnesota 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 Minnesota Tax Exempt are associated (or correlated) with Baron Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Health Care has no effect on the direction of Columbia Minnesota i.e., Columbia Minnesota and Baron Health go up and down completely randomly.
Pair Corralation between Columbia Minnesota and Baron Health
Assuming the 90 days horizon Columbia Minnesota Tax Exempt is expected to generate 0.3 times more return on investment than Baron Health. However, Columbia Minnesota Tax Exempt is 3.31 times less risky than Baron Health. It trades about -0.04 of its potential returns per unit of risk. Baron Health Care is currently generating about -0.04 per unit of risk. If you would invest 1,927 in Columbia Minnesota Tax Exempt on March 6, 2024 and sell it today you would lose (8.00) from holding Columbia Minnesota Tax Exempt or give up 0.42% of portfolio value over 90 days.
Over the last 90 days Columbia Minnesota Tax Exempt has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia Minnesota is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Over the last 90 days Baron Health Care has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Baron Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.