Correlation Between Azimut Holding and Highland Funds

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

By analyzing existing cross correlation between Azimut Holding SpA and Highland Funds I, you can compare the effects of market volatilities on Azimut Holding and Highland Funds 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 Azimut Holding with a short position of Highland Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azimut Holding and Highland Funds.

Diversification Opportunities for Azimut Holding and Highland Funds

0.09

Correlation Coefficient

Azimut Holding  Highland Funds

Significant diversification

The 3 months correlation between Azimut and Highland is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Azimut Holding SpA and Highland Funds I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Funds I and Azimut Holding 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 Azimut Holding SpA are associated (or correlated) with Highland Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Funds I has no effect on the direction of Azimut Holding i.e., Azimut Holding and Highland Funds go up and down completely randomly.

Pair Corralation between Azimut Holding and Highland Funds

Assuming the 90 days horizon Azimut Holding SpA is expected to generate 4.29 times more return on investment than Highland Funds. However, Azimut Holding is 4.29 times more volatile than Highland Funds I. It trades about 0.02 of its potential returns per unit of risk. Highland Funds I is currently generating about -0.01 per unit of risk. If you would invest  2,578  in Azimut Holding SpA on October 26, 2024 and sell it today you would earn a total of  39.00  from holding Azimut Holding SpA or generate 1.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	71.05%
Values	Daily Returns

Azimut Holding SpA  vs.  Highland Funds I

Azimut Holding SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Azimut Holding SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Azimut Holding is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Highland Funds I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Funds I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Azimut Holding and Highland Funds

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

The idea behind Azimut Holding SpA and Highland Funds I 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.