Correlation Between Highlight Tech and All Ring

Can any of the company-specific risk be diversified away by investing in both Highlight Tech and All Ring 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 Highlight Tech and All Ring into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Highlight Tech and All Ring Tech, you can compare the effects of market volatilities on Highlight Tech and All Ring 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 Highlight Tech with a short position of All Ring. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Tech and All Ring.

Diversification Opportunities for Highlight Tech and All Ring

0.77

Correlation Coefficient

Highlight Tech  All Ring

Poor diversification

The 3 months correlation between Highlight and All is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Tech and All Ring Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on All Ring Tech and Highlight Tech 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 Highlight Tech are associated (or correlated) with All Ring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of All Ring Tech has no effect on the direction of Highlight Tech i.e., Highlight Tech and All Ring go up and down completely randomly.

Pair Corralation between Highlight Tech and All Ring

Assuming the 90 days trading horizon Highlight Tech is expected to generate 0.44 times more return on investment than All Ring. However, Highlight Tech is 2.26 times less risky than All Ring. It trades about -0.06 of its potential returns per unit of risk. All Ring Tech is currently generating about -0.04 per unit of risk. If you would invest  5,320  in Highlight Tech on December 2, 2024 and sell it today you would lose (300.00) from holding Highlight Tech or give up 5.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Highlight Tech  vs.  All Ring Tech

Highlight Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highlight Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Highlight Tech is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

All Ring Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days All Ring Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Highlight Tech and All Ring

The main advantage of trading using opposite Highlight Tech and All Ring positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Tech position performs unexpectedly, All Ring 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 All Ring will offset losses from the drop in All Ring's long position.

The idea behind Highlight Tech and All Ring Tech pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.