Correlation Between Vanguard Long-term and Columbia Tax-exempt

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

By analyzing existing cross correlation between Vanguard Long Term Tax Exempt and Columbia Tax Exempt Fund, you can compare the effects of market volatilities on Vanguard Long-term and Columbia Tax-exempt 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 Vanguard Long-term with a short position of Columbia Tax-exempt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Long-term and Columbia Tax-exempt.

Diversification Opportunities for Vanguard Long-term and Columbia Tax-exempt

0.96

Correlation Coefficient

Vanguard Long-term  Columbia Tax-exempt

Almost no diversification

The 3 months correlation between Vanguard and Columbia is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Long Term Tax Exempt and Columbia Tax Exempt Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Tax Exempt and Vanguard Long-term 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 Vanguard Long Term Tax Exempt are associated (or correlated) with Columbia Tax-exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Tax Exempt has no effect on the direction of Vanguard Long-term i.e., Vanguard Long-term and Columbia Tax-exempt go up and down completely randomly.

Pair Corralation between Vanguard Long-term and Columbia Tax-exempt

Assuming the 90 days horizon Vanguard Long-term is expected to generate 3.0 times less return on investment than Columbia Tax-exempt. But when comparing it to its historical volatility, Vanguard Long Term Tax Exempt is 1.1 times less risky than Columbia Tax-exempt. It trades about 0.02 of its potential returns per unit of risk. Columbia Tax Exempt Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,171  in Columbia Tax Exempt Fund on February 20, 2024 and sell it today you would earn a total of  10.00  from holding Columbia Tax Exempt Fund or generate 0.85% return on investment over 90 days.

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

Vanguard Long Term Tax Exempt  vs.  Columbia Tax Exempt Fund

Vanguard Long Term

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Long Term Tax Exempt are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Long-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Tax Exempt

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Tax Exempt Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Columbia Tax-exempt is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Long-term and Columbia Tax-exempt

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

The idea behind Vanguard Long Term Tax Exempt and Columbia Tax Exempt 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.