Correlation Between Highland Long/short and Financial Services
Can any of the company-specific risk be diversified away by investing in both Highland Long/short and Financial Services 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 Financial Services 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 Financial Services Fund, you can compare the effects of market volatilities on Highland Long/short and Financial Services 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 Financial Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Long/short and Financial Services.
Diversification Opportunities for Highland Long/short and Financial Services
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Highland and Financial is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Financial Services Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Services 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 Financial Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Services has no effect on the direction of Highland Long/short i.e., Highland Long/short and Financial Services go up and down completely randomly.
Pair Corralation between Highland Long/short and Financial Services
Assuming the 90 days horizon Highland Long/short is expected to generate 1911.5 times less return on investment than Financial Services. But when comparing it to its historical volatility, Highland Longshort Healthcare is 5.33 times less risky than Financial Services. It trades about 0.0 of its potential returns per unit of risk. Financial Services Fund is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 8,518 in Financial Services Fund on September 5, 2024 and sell it today you would earn a total of 732.00 from holding Financial Services Fund or generate 8.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highland Longshort Healthcare vs. Financial Services Fund
Performance |
| Timeline |
| Highland Long/short |
| Financial Services |
Highland Long/short and Financial Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Long/short and Financial Services
The main advantage of trading using opposite Highland Long/short and Financial Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Long/short position performs unexpectedly, Financial Services 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 Financial Services will offset losses from the drop in Financial Services' long position.| Highland Long/short vs. Towpath Technology | Highland Long/short vs. Ivy Science And | Highland Long/short vs. Allianzgi Technology Fund | Highland Long/short vs. Pgim Jennison Technology |
| Financial Services vs. Blackrock Health Sciences | Financial Services vs. Allianzgi Health Sciences | Financial Services vs. Blackrock Health Sciences | Financial Services vs. Highland Longshort Healthcare |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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