Correlation Between CRDTS and Highstreet
Can any of the company-specific risk be diversified away by investing in both CRDTS and Highstreet 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 CRDTS and Highstreet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CRDTS and Highstreet, you can compare the effects of market volatilities on CRDTS and Highstreet 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 CRDTS with a short position of Highstreet. Check out your portfolio center. Please also check ongoing floating volatility patterns of CRDTS and Highstreet.
Diversification Opportunities for CRDTS and Highstreet
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between CRDTS and Highstreet is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding CRDTS and Highstreet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highstreet and CRDTS 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 CRDTS are associated (or correlated) with Highstreet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highstreet has no effect on the direction of CRDTS i.e., CRDTS and Highstreet go up and down completely randomly.
Pair Corralation between CRDTS and Highstreet
Assuming the 90 days trading horizon CRDTS is expected to generate 7.4 times less return on investment than Highstreet. But when comparing it to its historical volatility, CRDTS is 1.99 times less risky than Highstreet. It trades about 0.02 of its potential returns per unit of risk. Highstreet is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 118.00 in Highstreet on September 2, 2024 and sell it today you would earn a total of 71.00 from holding Highstreet or generate 60.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CRDTS vs. Highstreet
Performance |
| Timeline |
| CRDTS |
| Highstreet |
CRDTS and Highstreet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CRDTS and Highstreet
The main advantage of trading using opposite CRDTS and Highstreet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CRDTS position performs unexpectedly, Highstreet 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 Highstreet will offset losses from the drop in Highstreet's long position.The idea behind CRDTS and Highstreet 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.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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