Correlation Between New World and Highland Floating
Can any of the company-specific risk be diversified away by investing in both New World and Highland Floating 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 New World and Highland Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Fund and Highland Floating Rate, you can compare the effects of market volatilities on New World and Highland Floating 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 New World with a short position of Highland Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Highland Floating.
Diversification Opportunities for New World and Highland Floating
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Highland is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Highland Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Floating Rate and New World 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 New World Fund are associated (or correlated) with Highland Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Floating Rate has no effect on the direction of New World i.e., New World and Highland Floating go up and down completely randomly.
Pair Corralation between New World and Highland Floating
Assuming the 90 days horizon New World Fund is expected to under-perform the Highland Floating. In addition to that, New World is 1.6 times more volatile than Highland Floating Rate. It trades about -0.21 of its total potential returns per unit of risk. Highland Floating Rate is currently generating about -0.24 per unit of volatility. If you would invest 842.00 in Highland Floating Rate on August 30, 2024 and sell it today you would lose (18.00) from holding Highland Floating Rate or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Highland Floating Rate
Performance |
| Timeline |
| New World Fund |
| Highland Floating Rate |
New World and Highland Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Highland Floating
The main advantage of trading using opposite New World and Highland Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Highland Floating 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 Floating will offset losses from the drop in Highland Floating's long position.| New World vs. Vanguard Emerging Markets | New World vs. Vanguard Emerging Markets | New World vs. HUMANA INC | New World vs. Aquagold International |
| Highland Floating vs. Health Care Fund | Highland Floating vs. Prudential Health Sciences | Highland Floating vs. Hartford Healthcare Hls | Highland Floating vs. Alger Health Sciences |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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