Correlation Between Highland Long/short and Health Care
Can any of the company-specific risk be diversified away by investing in both Highland Long/short and Health Care 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 Health Care 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 Health Care Fund, you can compare the effects of market volatilities on Highland Long/short and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Long/short and Health Care.
Diversification Opportunities for Highland Long/short and Health Care
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Highland and Health is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Fund has no effect on the direction of Highland Long/short i.e., Highland Long/short and Health Care go up and down completely randomly.
Pair Corralation between Highland Long/short and Health Care
Assuming the 90 days horizon Highland Long/short is expected to generate 27.93 times less return on investment than Health Care. But when comparing it to its historical volatility, Highland Longshort Healthcare is 67.8 times less risky than Health Care. It trades about 0.13 of its potential returns per unit of risk. Health Care Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,310 in Health Care Fund on November 27, 2024 and sell it today you would earn a total of 7,621 from holding Health Care Fund or generate 230.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highland Longshort Healthcare vs. Health Care Fund
Performance |
| Timeline |
| Highland Long/short |
| Health Care Fund |
Highland Long/short and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Long/short and Health Care
The main advantage of trading using opposite Highland Long/short and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Long/short position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care's long position.The idea behind Highland Longshort Healthcare and Health Care 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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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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