Correlation Between Highland Long/short and American Mutual
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
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Highland Longshort Healthcare vs. American Mutual Fund
Performance |
Timeline |
Highland Long/short |
American Mutual |
Highland Long/short and American Mutual Volatility Contrast
Predicted Return Density |
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.Highland Long/short vs. Federated Muni And | ||
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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