Correlation Between Highland Longshort and Power Momentum
Can any of the company-specific risk be diversified away by investing in both Highland Longshort and Power Momentum 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 Longshort and Power Momentum 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 Power Momentum Index, you can compare the effects of market volatilities on Highland Longshort and Power Momentum 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 Longshort with a short position of Power Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Longshort and Power Momentum.
Diversification Opportunities for Highland Longshort and Power Momentum
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Highland and Power is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Power Momentum Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Momentum Index and Highland Longshort 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 Power Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Momentum Index has no effect on the direction of Highland Longshort i.e., Highland Longshort and Power Momentum go up and down completely randomly.
Pair Corralation between Highland Longshort and Power Momentum
Assuming the 90 days horizon Highland Longshort Healthcare is expected to under-perform the Power Momentum. But the mutual fund apears to be less risky and, when comparing its historical volatility, Highland Longshort Healthcare is 4.45 times less risky than Power Momentum. The mutual fund trades about -0.18 of its potential returns per unit of risk. The Power Momentum Index is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 1,528 in Power Momentum Index on September 12, 2024 and sell it today you would lose (8.00) from holding Power Momentum Index or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highland Longshort Healthcare vs. Power Momentum Index
Performance |
| Timeline |
| Highland Longshort |
| Power Momentum Index |
Highland Longshort and Power Momentum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Longshort and Power Momentum
The main advantage of trading using opposite Highland Longshort and Power Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Longshort position performs unexpectedly, Power Momentum 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 Power Momentum will offset losses from the drop in Power Momentum's long position.| Highland Longshort vs. Ab Bond Inflation | Highland Longshort vs. Western Asset Municipal | Highland Longshort vs. T Rowe Price | Highland Longshort vs. Doubleline Yield Opportunities |
| Power Momentum vs. Mid Cap Growth | Power Momentum vs. Smallcap Growth Fund | Power Momentum vs. T Rowe Price | Power Momentum vs. Tfa Alphagen Growth |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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