Correlation Between Short Duration and Highland Long/short

Can any of the company-specific risk be diversified away by investing in both Short Duration 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 Short Duration 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 Short Duration Inflation and Highland Longshort Healthcare, you can compare the effects of market volatilities on Short Duration 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 Short Duration with a short position of Highland Long/short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Duration and Highland Long/short.

Diversification Opportunities for Short Duration and Highland Long/short

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Correlation Coefficient

Short Duration  Highland Long/short

Pay attention - limited upside

The 3 months correlation between Short and Highland is 0.0. 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 Long/short 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 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 Short Duration i.e., Short Duration and Highland Long/short go up and down completely randomly.

Pair Corralation between Short Duration and Highland Long/short

Assuming the 90 days horizon Short Duration Inflation is expected to generate 0.69 times more return on investment than Highland Long/short. However, Short Duration Inflation is 1.45 times less risky than Highland Long/short. It trades about 0.38 of its potential returns per unit of risk. Highland Longshort Healthcare is currently generating about -0.43 per unit of risk. If you would invest  1,041  in Short Duration Inflation on December 10, 2024 and sell it today you would earn a total of  12.00  from holding Short Duration Inflation or generate 1.15% return on investment over 90 days.

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

Short Duration Inflation  vs.  Highland Longshort Healthcare

Short Duration Inflation

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Short Duration Inflation are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. 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 Long/short

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highland Longshort Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Highland Long/short 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 Long/short

The main advantage of trading using opposite Short Duration and Highland Long/short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Duration 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.

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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.