Correlation Between Highwood Asset and Paramount Resources
Can any of the company-specific risk be diversified away by investing in both Highwood Asset and Paramount Resources 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 Highwood Asset and Paramount Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highwood Asset Management and Paramount Resources, you can compare the effects of market volatilities on Highwood Asset and Paramount Resources 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 Highwood Asset with a short position of Paramount Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highwood Asset and Paramount Resources.
Diversification Opportunities for Highwood Asset and Paramount Resources
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Highwood and Paramount is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Highwood Asset Management and Paramount Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Resources and Highwood Asset 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 Highwood Asset Management are associated (or correlated) with Paramount Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Resources has no effect on the direction of Highwood Asset i.e., Highwood Asset and Paramount Resources go up and down completely randomly.
Pair Corralation between Highwood Asset and Paramount Resources
Assuming the 90 days horizon Highwood Asset is expected to generate 4.96 times less return on investment than Paramount Resources. But when comparing it to its historical volatility, Highwood Asset Management is 1.16 times less risky than Paramount Resources. It trades about 0.03 of its potential returns per unit of risk. Paramount Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,531 in Paramount Resources on September 12, 2024 and sell it today you would earn a total of 586.00 from holding Paramount Resources or generate 23.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highwood Asset Management vs. Paramount Resources
Performance |
| Timeline |
| Highwood Asset Management |
| Paramount Resources |
Highwood Asset and Paramount Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highwood Asset and Paramount Resources
The main advantage of trading using opposite Highwood Asset and Paramount Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highwood Asset position performs unexpectedly, Paramount Resources 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 Paramount Resources will offset losses from the drop in Paramount Resources' long position.| Highwood Asset vs. Brompton Lifeco Split | Highwood Asset vs. North American Financial | Highwood Asset vs. Prime Dividend Corp | Highwood Asset vs. Financial 15 Split |
| Paramount Resources vs. Brookfield Asset Management | Paramount Resources vs. AGF Management Limited | Paramount Resources vs. Precision Drilling | Paramount Resources vs. Data Communications Management |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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