Correlation Between Short Duration and Highland Longshort

Can any of the company-specific risk be diversified away by investing in both Short Duration and Highland Longshort 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 Short Duration and Highland Longshort into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Short Duration Inflation and Highland Longshort Healthcare, you can compare the effects of market volatilities on Short Duration and Highland Longshort 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 Short Duration with a short position of Highland Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Duration and Highland Longshort.

Diversification Opportunities for Short Duration and Highland Longshort

-0.35

Correlation Coefficient

Short Duration  Highland Longshort

Very good diversification

The 3 months correlation between Short and Highland is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Inflation and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Longshort and Short Duration 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 Short Duration Inflation are associated (or correlated) with Highland Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Longshort has no effect on the direction of Short Duration i.e., Short Duration and Highland Longshort go up and down completely randomly.

Pair Corralation between Short Duration and Highland Longshort

Assuming the 90 days horizon Short Duration is expected to generate 4.24 times less return on investment than Highland Longshort. In addition to that, Short Duration is 1.18 times more volatile than Highland Longshort Healthcare. It trades about 0.03 of its total potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.15 per unit of volatility. If you would invest  1,539  in Highland Longshort Healthcare on September 20, 2024 and sell it today you would earn a total of  110.00  from holding Highland Longshort Healthcare or generate 7.15% return on investment over 90 days.

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

Short Duration Inflation  vs.  Highland Longshort Healthcare

Short Duration Inflation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Short Duration Inflation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Short Duration is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Highland Longshort

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Highland Longshort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Duration and Highland Longshort

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

The idea behind Short Duration Inflation and Highland Longshort Healthcare 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.