Correlation Between Highlight Communications and Maschinenfabrik Berthold
Can any of the company-specific risk be diversified away by investing in both Highlight Communications and Maschinenfabrik Berthold 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 Highlight Communications and Maschinenfabrik Berthold into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and Maschinenfabrik Berthold Hermle, you can compare the effects of market volatilities on Highlight Communications and Maschinenfabrik Berthold 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 Highlight Communications with a short position of Maschinenfabrik Berthold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and Maschinenfabrik Berthold.
Diversification Opportunities for Highlight Communications and Maschinenfabrik Berthold
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Highlight and Maschinenfabrik is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Maschinenfabrik Berthold Herml in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maschinenfabrik Berthold and Highlight Communications 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 Highlight Communications AG are associated (or correlated) with Maschinenfabrik Berthold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maschinenfabrik Berthold has no effect on the direction of Highlight Communications i.e., Highlight Communications and Maschinenfabrik Berthold go up and down completely randomly.
Pair Corralation between Highlight Communications and Maschinenfabrik Berthold
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 4.41 times more return on investment than Maschinenfabrik Berthold. However, Highlight Communications is 4.41 times more volatile than Maschinenfabrik Berthold Hermle. It trades about 0.3 of its potential returns per unit of risk. Maschinenfabrik Berthold Hermle is currently generating about 0.09 per unit of risk. If you would invest 108.00 in Highlight Communications AG on October 20, 2024 and sell it today you would earn a total of 44.00 from holding Highlight Communications AG or generate 40.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. Maschinenfabrik Berthold Herml
Performance |
| Timeline |
| Highlight Communications |
| Maschinenfabrik Berthold |
Highlight Communications and Maschinenfabrik Berthold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and Maschinenfabrik Berthold
The main advantage of trading using opposite Highlight Communications and Maschinenfabrik Berthold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications position performs unexpectedly, Maschinenfabrik Berthold 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 Maschinenfabrik Berthold will offset losses from the drop in Maschinenfabrik Berthold's long position.| Highlight Communications vs. OFFICE DEPOT | Highlight Communications vs. Neinor Homes SA | Highlight Communications vs. Focus Home Interactive | Highlight Communications vs. DFS Furniture PLC |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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