Correlation Between Extended Market and Highland Long/short
Can any of the company-specific risk be diversified away by investing in both Extended Market 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 Extended Market 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 Extended Market Index and Highland Longshort Healthcare, you can compare the effects of market volatilities on Extended Market 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 Extended Market with a short position of Highland Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Highland Long/short.
Diversification Opportunities for Extended Market and Highland Long/short
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Extended and Highland is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index 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 Extended Market 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 Extended Market Index 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 Extended Market i.e., Extended Market and Highland Long/short go up and down completely randomly.
Pair Corralation between Extended Market and Highland Long/short
Assuming the 90 days horizon Extended Market Index is expected to under-perform the Highland Long/short. In addition to that, Extended Market is 8.73 times more volatile than Highland Longshort Healthcare. It trades about -0.04 of its total potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.13 per unit of volatility. If you would invest 1,619 in Highland Longshort Healthcare on October 18, 2024 and sell it today you would earn a total of 33.00 from holding Highland Longshort Healthcare or generate 2.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Highland Longshort Healthcare
Performance |
| Timeline |
| Extended Market Index |
| Highland Long/short |
Extended Market and Highland Long/short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Highland Long/short
The main advantage of trading using opposite Extended Market and Highland Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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.| Extended Market vs. Clearbridge Energy Mlp | Extended Market vs. Pimco Energy Tactical | Extended Market vs. World Energy Fund | Extended Market vs. Invesco Energy Fund |
| Highland Long/short vs. Extended Market Index | Highland Long/short vs. Sp Midcap Index | Highland Long/short vs. Inverse Emerging Markets | Highland Long/short vs. Artisan Developing World |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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