Correlation Between Highland Small-cap and Simt Real
Can any of the company-specific risk be diversified away by investing in both Highland Small-cap and Simt Real 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 Small-cap and Simt Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highland Small Cap Equity and Simt Real Estate, you can compare the effects of market volatilities on Highland Small-cap and Simt Real 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 Small-cap with a short position of Simt Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Small-cap and Simt Real.
Diversification Opportunities for Highland Small-cap and Simt Real
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Highland and Simt is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Highland Small Cap Equity and Simt Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Real Estate and Highland Small-cap 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 Small Cap Equity are associated (or correlated) with Simt Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Real Estate has no effect on the direction of Highland Small-cap i.e., Highland Small-cap and Simt Real go up and down completely randomly.
Pair Corralation between Highland Small-cap and Simt Real
Assuming the 90 days horizon Highland Small Cap Equity is expected to under-perform the Simt Real. But the mutual fund apears to be less risky and, when comparing its historical volatility, Highland Small Cap Equity is 1.17 times less risky than Simt Real. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Simt Real Estate is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,357 in Simt Real Estate on November 19, 2024 and sell it today you would earn a total of 274.00 from holding Simt Real Estate or generate 20.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highland Small Cap Equity vs. Simt Real Estate
Performance |
| Timeline |
| Highland Small Cap |
| Simt Real Estate |
Highland Small-cap and Simt Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Small-cap and Simt Real
The main advantage of trading using opposite Highland Small-cap and Simt Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Small-cap position performs unexpectedly, Simt Real 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 Simt Real will offset losses from the drop in Simt Real's long position.The idea behind Highland Small Cap Equity and Simt Real Estate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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