Correlation Between Highland Longshort and State Street
Can any of the company-specific risk be diversified away by investing in both Highland Longshort and State Street 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 State Street 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 State Street Global, you can compare the effects of market volatilities on Highland Longshort and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Longshort and State Street.
Diversification Opportunities for Highland Longshort and State Street
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Highland and State is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and State Street Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Global 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Global has no effect on the direction of Highland Longshort i.e., Highland Longshort and State Street go up and down completely randomly.
Pair Corralation between Highland Longshort and State Street
Assuming the 90 days horizon Highland Longshort is expected to generate 1.11 times less return on investment than State Street. But when comparing it to its historical volatility, Highland Longshort Healthcare is 4.3 times less risky than State Street. It trades about 0.19 of its potential returns per unit of risk. State Street Global is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 9,510 in State Street Global on August 31, 2024 and sell it today you would earn a total of 1,330 from holding State Street Global or generate 13.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Highland Longshort Healthcare vs. State Street Global
Performance |
| Timeline |
| Highland Longshort |
| State Street Global |
Highland Longshort and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Longshort and State Street
The main advantage of trading using opposite Highland Longshort and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Longshort position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| Highland Longshort vs. Short Term Government Fund | Highland Longshort vs. Franklin Adjustable Government | Highland Longshort vs. Government Securities Fund | Highland Longshort vs. Franklin Government Money |
| State Street vs. Blackrock Health Sciences | State Street vs. Tekla Healthcare Opportunities | State Street vs. Invesco Global Health | State Street 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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