Correlation Between Highland Long/short and Highland Merger
Can any of the company-specific risk be diversified away by investing in both Highland Long/short and Highland Merger 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 Highland Long/short and Highland Merger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highland Longshort Healthcare and Highland Merger Arbitrage, you can compare the effects of market volatilities on Highland Long/short and Highland Merger 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 Highland Long/short with a short position of Highland Merger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Long/short and Highland Merger.
Diversification Opportunities for Highland Long/short and Highland Merger
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Highland and Highland is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Highland Merger Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Merger Arbitrage and Highland Long/short 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 Highland Longshort Healthcare are associated (or correlated) with Highland Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Merger Arbitrage has no effect on the direction of Highland Long/short i.e., Highland Long/short and Highland Merger go up and down completely randomly.
Pair Corralation between Highland Long/short and Highland Merger
Assuming the 90 days horizon Highland Longshort Healthcare is expected to generate 1.6 times more return on investment than Highland Merger. However, Highland Long/short is 1.6 times more volatile than Highland Merger Arbitrage. It trades about 0.12 of its potential returns per unit of risk. Highland Merger Arbitrage is currently generating about 0.14 per unit of risk. If you would invest 1,396 in Highland Longshort Healthcare on August 25, 2024 and sell it today you would earn a total of 177.00 from holding Highland Longshort Healthcare or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highland Longshort Healthcare vs. Highland Merger Arbitrage
Performance |
| Timeline |
| Highland Long/short |
| Highland Merger Arbitrage |
Highland Long/short and Highland Merger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Long/short and Highland Merger
The main advantage of trading using opposite Highland Long/short and Highland Merger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Long/short position performs unexpectedly, Highland Merger 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 Merger will offset losses from the drop in Highland Merger's long position.| Highland Long/short vs. Global Technology Portfolio | Highland Long/short vs. Science Technology Fund | Highland Long/short vs. Fidelity Advisor Technology | Highland Long/short vs. Red Oak Technology |
| Highland Merger vs. Franklin Natural Resources | Highland Merger vs. Gmo Resources | Highland Merger vs. World Energy Fund | Highland Merger vs. Clearbridge Energy Mlp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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