Correlation Between Highland Merger and Highland Small-cap
Can any of the company-specific risk be diversified away by investing in both Highland Merger and Highland Small-cap 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 Merger and Highland Small-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highland Merger Arbitrage and Highland Small Cap Equity, you can compare the effects of market volatilities on Highland Merger and Highland Small-cap 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 Merger with a short position of Highland Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Merger and Highland Small-cap.
Diversification Opportunities for Highland Merger and Highland Small-cap
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Highland and Highland is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Highland Merger Arbitrage and Highland Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Small Cap and Highland Merger 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 Merger Arbitrage are associated (or correlated) with Highland Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Small Cap has no effect on the direction of Highland Merger i.e., Highland Merger and Highland Small-cap go up and down completely randomly.
Pair Corralation between Highland Merger and Highland Small-cap
Assuming the 90 days horizon Highland Merger is expected to generate 19.33 times less return on investment than Highland Small-cap. But when comparing it to its historical volatility, Highland Merger Arbitrage is 7.7 times less risky than Highland Small-cap. It trades about 0.02 of its potential returns per unit of risk. Highland Small Cap Equity is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 312.00 in Highland Small Cap Equity on August 25, 2024 and sell it today you would earn a total of 3.00 from holding Highland Small Cap Equity or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highland Merger Arbitrage vs. Highland Small Cap Equity
Performance |
| Timeline |
| Highland Merger Arbitrage |
| Highland Small Cap |
Highland Merger and Highland Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Merger and Highland Small-cap
The main advantage of trading using opposite Highland Merger and Highland Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Merger position performs unexpectedly, Highland Small-cap 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 Highland Small-cap will offset losses from the drop in Highland Small-cap's long position.| Highland Merger vs. Blackrock Inflation Protected | Highland Merger vs. Short Duration Inflation | Highland Merger vs. Tiaa Cref Inflation Link | Highland Merger vs. Lord Abbett Inflation |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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