Correlation Between Highland Long/short and Small Company
Can any of the company-specific risk be diversified away by investing in both Highland Long/short and Small Company 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 Small Company 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 Small Pany Value, you can compare the effects of market volatilities on Highland Long/short and Small Company 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 Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Long/short and Small Company.
Diversification Opportunities for Highland Long/short and Small Company
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Highland and Small is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Small Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Value 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 Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Value has no effect on the direction of Highland Long/short i.e., Highland Long/short and Small Company go up and down completely randomly.
Pair Corralation between Highland Long/short and Small Company
Assuming the 90 days horizon Highland Long/short is expected to generate 2.47 times less return on investment than Small Company. But when comparing it to its historical volatility, Highland Longshort Healthcare is 6.05 times less risky than Small Company. It trades about 0.13 of its potential returns per unit of risk. Small Pany Value is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,251 in Small Pany Value on September 4, 2024 and sell it today you would earn a total of 1,061 from holding Small Pany Value or generate 32.64% 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. Small Pany Value
Performance |
| Timeline |
| Highland Long/short |
| Small Pany Value |
Highland Long/short and Small Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Long/short and Small Company
The main advantage of trading using opposite Highland Long/short and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Long/short position performs unexpectedly, Small Company 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 Small Company will offset losses from the drop in Small Company's long position.| Highland Long/short vs. Angel Oak Financial | Highland Long/short vs. Blrc Sgy Mnp | Highland Long/short vs. Legg Mason Partners | Highland Long/short vs. Federated Pennsylvania Municipal |
| Small Company vs. Baron Health Care | Small Company vs. Fidelity Advisor Health | Small Company vs. Highland Longshort Healthcare | Small Company vs. Eventide Healthcare Life |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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