Correlation Between Highland Small-cap and Highland Long/short
Can any of the company-specific risk be diversified away by investing in both Highland Small-cap 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 Small-cap 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 Small Cap Equity and Highland Longshort Healthcare, you can compare the effects of market volatilities on Highland Small-cap 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 Small-cap with a short position of Highland Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Small-cap and Highland Long/short.
Diversification Opportunities for Highland Small-cap and Highland Long/short
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Highland and Highland is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Highland Small Cap Equity 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 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 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 Small-cap i.e., Highland Small-cap and Highland Long/short go up and down completely randomly.
Pair Corralation between Highland Small-cap and Highland Long/short
Assuming the 90 days horizon Highland Small Cap Equity is expected to under-perform the Highland Long/short. In addition to that, Highland Small-cap is 4.99 times more volatile than Highland Longshort Healthcare. It trades about -0.03 of its total potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.11 per unit of volatility. If you would invest 1,282 in Highland Longshort Healthcare on August 25, 2024 and sell it today you would earn a total of 145.00 from holding Highland Longshort Healthcare or generate 11.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highland Small Cap Equity vs. Highland Longshort Healthcare
Performance |
| Timeline |
| Highland Small Cap |
| Highland Long/short |
Highland Small-cap and Highland Long/short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highland Small-cap and Highland Long/short
The main advantage of trading using opposite Highland Small-cap and Highland Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Small-cap 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 Small-cap vs. Qs Large Cap | Highland Small-cap vs. Lord Abbett Diversified | Highland Small-cap vs. Delaware Limited Term Diversified | Highland Small-cap vs. Omni Small Cap Value |
| Highland Long/short vs. Ms Global Fixed | Highland Long/short vs. Gmo Emerging Country | Highland Long/short vs. Barings Active Short | Highland Long/short vs. California Bond Fund |
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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