Correlation Between Century Communities and Columbia Sportswear

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

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

Diversification Opportunities for Century Communities and Columbia Sportswear

0.35

Correlation Coefficient

Century Communities  Columbia Sportswear

Weak diversification

The 3 months correlation between Century and Columbia is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Century Communities and Columbia Sportswear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Sportswear and Century Communities 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 Century Communities are associated (or correlated) with Columbia Sportswear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Sportswear has no effect on the direction of Century Communities i.e., Century Communities and Columbia Sportswear go up and down completely randomly.

Pair Corralation between Century Communities and Columbia Sportswear

Considering the 90-day investment horizon Century Communities is expected to generate 1.5 times more return on investment than Columbia Sportswear. However, Century Communities is 1.5 times more volatile than Columbia Sportswear. It trades about 0.05 of its potential returns per unit of risk. Columbia Sportswear is currently generating about 0.01 per unit of risk. If you would invest  5,290  in Century Communities on January 25, 2024 and sell it today you would earn a total of  3,090  from holding Century Communities or generate 58.41% return on investment over 90 days.

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

Century Communities  vs.  Columbia Sportswear

Century Communities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Communities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Century Communities is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Columbia Sportswear

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Columbia Sportswear is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Century Communities and Columbia Sportswear

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

The idea behind Century Communities and Columbia Sportswear 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..