Correlation Between Highland Merger and Highland Long/short
Can any of the company-specific risk be diversified away by investing in both Highland Merger and Highland Long/short 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 Long/short 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 Longshort Healthcare, you can compare the effects of market volatilities on Highland Merger and Highland Long/short 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 Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Merger and Highland Long/short.
Diversification Opportunities for Highland Merger and Highland Long/short
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Highland and Highland is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Highland Merger Arbitrage and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Long/short 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 Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Long/short has no effect on the direction of Highland Merger i.e., Highland Merger and Highland Long/short go up and down completely randomly.
Pair Corralation between Highland Merger and Highland Long/short
Assuming the 90 days horizon Highland Merger is expected to generate 1.68 times less return on investment than Highland Long/short. But when comparing it to its historical volatility, Highland Merger Arbitrage is 2.01 times less risky than Highland Long/short. It trades about 0.11 of its potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,423 in Highland Longshort Healthcare on August 29, 2024 and sell it today you would earn a total of 6.00 from holding Highland Longshort Healthcare or generate 0.42% 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 Longshort Healthcare
Performance |
| Timeline |
| Highland Merger Arbitrage |
| Highland Long/short |
Highland Merger and Highland Long/short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Merger and Highland Long/short
The main advantage of trading using opposite Highland Merger and Highland Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Merger position performs unexpectedly, Highland Long/short 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 Long/short will offset losses from the drop in Highland Long/short's long position.| Highland Merger vs. Old Westbury Large | Highland Merger vs. Gmo Equity Allocation | Highland Merger vs. Aqr Large Cap | Highland Merger vs. Federated Mdt Large |
| Highland Long/short vs. Dreyfus Natural Resources | Highland Long/short vs. Fidelity Advisor Energy | Highland Long/short vs. Short Oil Gas | Highland Long/short vs. Clearbridge Energy Mlp |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |