Correlation Between LANDSEA HOMES and Highlight Communications

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

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

Diversification Opportunities for LANDSEA HOMES and Highlight Communications

0.04

Correlation Coefficient

LANDSEA HOMES  Highlight Communications

Significant diversification

The 3 months correlation between LANDSEA and Highlight is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding LANDSEA HOMES P and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications and LANDSEA HOMES 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 LANDSEA HOMES P are associated (or correlated) with Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of LANDSEA HOMES i.e., LANDSEA HOMES and Highlight Communications go up and down completely randomly.

Pair Corralation between LANDSEA HOMES and Highlight Communications

Assuming the 90 days horizon LANDSEA HOMES P is expected to under-perform the Highlight Communications. In addition to that, LANDSEA HOMES is 1.47 times more volatile than Highlight Communications AG. It trades about -0.17 of its total potential returns per unit of risk. Highlight Communications AG is currently generating about 0.17 per unit of volatility. If you would invest  97.00  in Highlight Communications AG on September 20, 2024 and sell it today you would earn a total of  16.00  from holding Highlight Communications AG or generate 16.49% return on investment over 90 days.

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

LANDSEA HOMES P  vs.  Highlight Communications AG

LANDSEA HOMES P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LANDSEA HOMES P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Highlight Communications

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Highlight Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LANDSEA HOMES and Highlight Communications

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

The idea behind LANDSEA HOMES P and Highlight Communications AG 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.