Correlation Between Smallcap Fund and Highland Longshort
Can any of the company-specific risk be diversified away by investing in both Smallcap Fund and Highland Longshort 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 Smallcap Fund and Highland Longshort into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Fund Fka and Highland Longshort Healthcare, you can compare the effects of market volatilities on Smallcap Fund and Highland Longshort 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 Smallcap Fund with a short position of Highland Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Fund and Highland Longshort.
Diversification Opportunities for Smallcap Fund and Highland Longshort
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smallcap and Highland is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Fund Fka and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Longshort and Smallcap Fund 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 Smallcap Fund Fka are associated (or correlated) with Highland Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Longshort has no effect on the direction of Smallcap Fund i.e., Smallcap Fund and Highland Longshort go up and down completely randomly.
Pair Corralation between Smallcap Fund and Highland Longshort
Assuming the 90 days horizon Smallcap Fund Fka is expected to generate 4.88 times more return on investment than Highland Longshort. However, Smallcap Fund is 4.88 times more volatile than Highland Longshort Healthcare. It trades about 0.14 of its potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.24 per unit of risk. If you would invest 2,573 in Smallcap Fund Fka on November 4, 2024 and sell it today you would earn a total of 75.00 from holding Smallcap Fund Fka or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap Fund Fka vs. Highland Longshort Healthcare
Performance |
| Timeline |
| Smallcap Fund Fka |
| Highland Longshort |
Smallcap Fund and Highland Longshort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Fund and Highland Longshort
The main advantage of trading using opposite Smallcap Fund and Highland Longshort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Fund position performs unexpectedly, Highland Longshort 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 Longshort will offset losses from the drop in Highland Longshort's long position.| Smallcap Fund vs. Virtus Convertible | Smallcap Fund vs. Advent Claymore Convertible | Smallcap Fund vs. Absolute Convertible Arbitrage | Smallcap Fund vs. Rationalpier 88 Convertible |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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