Correlation Between Dow Jones and Highland Long/short
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Highland Long/short 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 Dow Jones and Highland Long/short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Highland Longshort Healthcare, you can compare the effects of market volatilities on Dow Jones and Highland Long/short 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 Dow Jones with a short position of Highland Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Highland Long/short.
Diversification Opportunities for Dow Jones and Highland Long/short
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Dow and Highland is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Long/short and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Highland Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Long/short has no effect on the direction of Dow Jones i.e., Dow Jones and Highland Long/short go up and down completely randomly.
Pair Corralation between Dow Jones and Highland Long/short
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 4.47 times more return on investment than Highland Long/short. However, Dow Jones is 4.47 times more volatile than Highland Longshort Healthcare. It trades about 0.21 of its potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.11 per unit of risk. If you would invest 4,237,436 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 192,215 from holding Dow Jones Industrial or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dow Jones Industrial vs. Highland Longshort Healthcare
Performance |
| Timeline |
Dow Jones and Highland Long/short Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Highland Longshort Healthcare
Pair trading matchups for Highland Long/short
Pair Trading with Dow Jones and Highland Long/short
The main advantage of trading using opposite Dow Jones and Highland Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Highland Long/short 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 Highland Long/short will offset losses from the drop in Highland Long/short's long position.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| Highland Long/short vs. Ultra Short Term Fixed | Highland Long/short vs. Rbc Short Duration | Highland Long/short vs. Jhancock Short Duration | Highland Long/short vs. Ultra Short Fixed Income |
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 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..
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