Correlation Between Health Care and Highland Floating
Can any of the company-specific risk be diversified away by investing in both Health Care 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 Health Care and Highland Floating into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Health Care Fund and Highland Floating Rate, you can compare the effects of market volatilities on Health Care 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 Health Care with a short position of Highland Floating. Check out your portfolio center. Please also check ongoing floating volatility patterns of Health Care and Highland Floating.
Diversification Opportunities for Health Care and Highland Floating
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Health and Highland is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Health Care 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 Health Care 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 Health Care 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 Health Care i.e., Health Care and Highland Floating go up and down completely randomly.
Pair Corralation between Health Care and Highland Floating
Assuming the 90 days horizon Health Care is expected to generate 1.08 times less return on investment than Highland Floating. In addition to that, Health Care is 1.3 times more volatile than Highland Floating Rate. It trades about 0.04 of its total potential returns per unit of risk. Highland Floating Rate is currently generating about 0.06 per unit of volatility. If you would invest 786.00 in Highland Floating Rate on September 1, 2024 and sell it today you would earn a total of 31.00 from holding Highland Floating Rate or generate 3.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Health Care Fund vs. Highland Floating Rate
Performance |
| Timeline |
| Health Care Fund |
| Highland Floating Rate |
Health Care and Highland Floating Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Health Care and Highland Floating
The main advantage of trading using opposite Health Care and Highland Floating positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Health Care 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.| Health Care vs. Banking Fund Class | Health Care vs. Basic Materials Fund | Health Care vs. Biotechnology Fund Class | Health Care vs. Government Long Bond |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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