Correlation Between Highland Small-cap and Ultra-short Term
Can any of the company-specific risk be diversified away by investing in both Highland Small-cap and Ultra-short Term 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 Ultra-short Term 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 Ultra Short Term Fixed, you can compare the effects of market volatilities on Highland Small-cap and Ultra-short Term 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 Ultra-short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Small-cap and Ultra-short Term.
Diversification Opportunities for Highland Small-cap and Ultra-short Term
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Highland and Ultra-short is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Highland Small Cap Equity and Ultra Short Term Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultra Short Term 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 Ultra-short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultra Short Term has no effect on the direction of Highland Small-cap i.e., Highland Small-cap and Ultra-short Term go up and down completely randomly.
Pair Corralation between Highland Small-cap and Ultra-short Term
Assuming the 90 days horizon Highland Small Cap Equity is expected to under-perform the Ultra-short Term. In addition to that, Highland Small-cap is 36.2 times more volatile than Ultra Short Term Fixed. It trades about -0.14 of its total potential returns per unit of risk. Ultra Short Term Fixed is currently generating about 0.1 per unit of volatility. If you would invest 974.00 in Ultra Short Term Fixed on January 24, 2025 and sell it today you would earn a total of 1.00 from holding Ultra Short Term Fixed or generate 0.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highland Small Cap Equity vs. Ultra Short Term Fixed
Performance |
| Timeline |
| Highland Small Cap |
| Ultra Short Term |
Highland Small-cap and Ultra-short Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Small-cap and Ultra-short Term
The main advantage of trading using opposite Highland Small-cap and Ultra-short Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Small-cap position performs unexpectedly, Ultra-short Term 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 Ultra-short Term will offset losses from the drop in Ultra-short Term's long position.The idea behind Highland Small Cap Equity and Ultra Short Term Fixed 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.
| Ultra-short Term vs. Emerging Markets Equity | Ultra-short Term vs. Global Fixed Income | Ultra-short Term vs. Global Fixed Income | Ultra-short Term vs. Global Fixed Income |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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