Correlation Between Highland Long/short and Highland Small-cap
Can any of the company-specific risk be diversified away by investing in both Highland Long/short and Highland Small-cap 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 Small-cap 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 Small Cap Equity, you can compare the effects of market volatilities on Highland Long/short and Highland Small-cap 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 Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Long/short and Highland Small-cap.
Diversification Opportunities for Highland Long/short and Highland Small-cap
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Highland and Highland is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Highland Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Small Cap 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 Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Small Cap has no effect on the direction of Highland Long/short i.e., Highland Long/short and Highland Small-cap go up and down completely randomly.
Pair Corralation between Highland Long/short and Highland Small-cap
Assuming the 90 days horizon Highland Long/short is expected to generate 14.68 times less return on investment than Highland Small-cap. But when comparing it to its historical volatility, Highland Longshort Healthcare is 3.31 times less risky than Highland Small-cap. It trades about 0.08 of its potential returns per unit of risk. Highland Small Cap Equity is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 573.00 in Highland Small Cap Equity on September 1, 2024 and sell it today you would earn a total of 29.00 from holding Highland Small Cap Equity or generate 5.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Highland Longshort Healthcare vs. Highland Small Cap Equity
Performance |
| Timeline |
| Highland Long/short |
| Highland Small Cap |
Highland Long/short and Highland Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Long/short and Highland Small-cap
The main advantage of trading using opposite Highland Long/short and Highland Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Long/short position performs unexpectedly, Highland Small-cap 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 Small-cap will offset losses from the drop in Highland Small-cap's long position.The idea behind Highland Longshort Healthcare and Highland Small Cap Equity 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.
| Highland Small-cap vs. Lord Abbett Diversified | Highland Small-cap vs. Aqr Diversified Arbitrage | Highland Small-cap vs. Harbor Diversified International | Highland Small-cap vs. Sentinel Small Pany |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |