Correlation Between Golden Friends and Highlight Tech
Can any of the company-specific risk be diversified away by investing in both Golden Friends and Highlight Tech 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 Golden Friends and Highlight Tech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Golden Friends and Highlight Tech, you can compare the effects of market volatilities on Golden Friends and Highlight Tech 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 Golden Friends with a short position of Highlight Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Golden Friends and Highlight Tech.
Diversification Opportunities for Golden Friends and Highlight Tech
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Golden and Highlight is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Golden Friends and Highlight Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Tech and Golden Friends 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 Golden Friends are associated (or correlated) with Highlight Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Tech has no effect on the direction of Golden Friends i.e., Golden Friends and Highlight Tech go up and down completely randomly.
Pair Corralation between Golden Friends and Highlight Tech
Assuming the 90 days trading horizon Golden Friends is expected to generate 0.59 times more return on investment than Highlight Tech. However, Golden Friends is 1.69 times less risky than Highlight Tech. It trades about -0.16 of its potential returns per unit of risk. Highlight Tech is currently generating about -0.47 per unit of risk. If you would invest 10,450 in Golden Friends on September 3, 2024 and sell it today you would lose (200.00) from holding Golden Friends or give up 1.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Golden Friends vs. Highlight Tech
Performance |
| Timeline |
| Golden Friends |
| Highlight Tech |
Golden Friends and Highlight Tech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Golden Friends and Highlight Tech
The main advantage of trading using opposite Golden Friends and Highlight Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Golden Friends position performs unexpectedly, Highlight Tech 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 Highlight Tech will offset losses from the drop in Highlight Tech's long position.| Golden Friends vs. Highlight Tech | Golden Friends vs. WiseChip Semiconductor | Golden Friends vs. Novatek Microelectronics Corp | Golden Friends vs. Leader Electronics |
| Highlight Tech vs. WiseChip Semiconductor | Highlight Tech vs. Novatek Microelectronics Corp | Highlight Tech vs. Leader Electronics | Highlight Tech vs. Information Technology Total |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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