Correlation Between Highland Long/short and American Mutual

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Can any of the company-specific risk be diversified away by investing in both Highland Long/short and American Mutual 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 American Mutual 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 American Mutual Fund, you can compare the effects of market volatilities on Highland Long/short and American Mutual 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 American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Long/short and American Mutual.

Diversification Opportunities for Highland Long/short and American Mutual

HighlandAmericanDiversified AwayHighlandAmericanDiversified Away100%
0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Highland and American is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual 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 American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of Highland Long/short i.e., Highland Long/short and American Mutual go up and down completely randomly.

Pair Corralation between Highland Long/short and American Mutual

Assuming the 90 days horizon Highland Longshort Healthcare is expected to under-perform the American Mutual. But the mutual fund apears to be less risky and, when comparing its historical volatility, Highland Longshort Healthcare is 2.0 times less risky than American Mutual. The mutual fund trades about -0.1 of its potential returns per unit of risk. The American Mutual Fund is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  5,589  in American Mutual Fund on November 21, 2024 and sell it today you would earn a total of  128.00  from holding American Mutual Fund or generate 2.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Highland Longshort Healthcare  vs.  American Mutual Fund

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -8-6-4-20
JavaScript chart by amCharts 3.21.15HHCZX AMFCX
       Timeline  
Highland Long/short 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Highland Long/short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb16.416.4516.516.5516.616.65
American Mutual 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days American Mutual Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, American Mutual is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb545556575859

Highland Long/short and American Mutual Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.17-0.0814-0.053-0.02580.00.02570.05270.07970.15 24681012
JavaScript chart by amCharts 3.21.15HHCZX AMFCX
       Returns  

Pair Trading with Highland Long/short and American Mutual

The main advantage of trading using opposite Highland Long/short and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Long/short position performs unexpectedly, American Mutual 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 American Mutual will offset losses from the drop in American Mutual's long position.
The idea behind Highland Longshort Healthcare and American Mutual Fund 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.
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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