Correlation Between Alternative Credit and Highland Merger
Can any of the company-specific risk be diversified away by investing in both Alternative Credit and Highland Merger 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 Alternative Credit and Highland Merger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alternative Credit Income and Highland Merger Arbitrage, you can compare the effects of market volatilities on Alternative Credit and Highland Merger 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 Alternative Credit with a short position of Highland Merger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alternative Credit and Highland Merger.
Diversification Opportunities for Alternative Credit and Highland Merger
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alternative and Highland is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Credit Income and Highland Merger Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Merger Arbitrage and Alternative Credit 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 Alternative Credit Income are associated (or correlated) with Highland Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Merger Arbitrage has no effect on the direction of Alternative Credit i.e., Alternative Credit and Highland Merger go up and down completely randomly.
Pair Corralation between Alternative Credit and Highland Merger
Assuming the 90 days horizon Alternative Credit Income is expected to generate 1.58 times more return on investment than Highland Merger. However, Alternative Credit is 1.58 times more volatile than Highland Merger Arbitrage. It trades about 0.06 of its potential returns per unit of risk. Highland Merger Arbitrage is currently generating about 0.06 per unit of risk. If you would invest 964.00 in Alternative Credit Income on August 25, 2024 and sell it today you would earn a total of 11.00 from holding Alternative Credit Income or generate 1.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alternative Credit Income vs. Highland Merger Arbitrage
Performance |
| Timeline |
| Alternative Credit Income |
| Highland Merger Arbitrage |
Alternative Credit and Highland Merger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alternative Credit and Highland Merger
The main advantage of trading using opposite Alternative Credit and Highland Merger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alternative Credit position performs unexpectedly, Highland Merger 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 Merger will offset losses from the drop in Highland Merger's long position.| Alternative Credit vs. Vanguard Total Stock | Alternative Credit vs. Vanguard 500 Index | Alternative Credit vs. Vanguard Total Stock | Alternative Credit vs. Vanguard Total Stock |
| Highland Merger vs. Franklin Natural Resources | Highland Merger vs. Gmo Resources | Highland Merger vs. World Energy Fund | Highland Merger vs. Clearbridge Energy Mlp |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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