Correlation Between BBX Capital and Highland Funds

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

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

Diversification Opportunities for BBX Capital and Highland Funds

0.89

Correlation Coefficient

BBX Capital  Highland Funds

Very poor diversification

The 3 months correlation between BBX and Highland is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BBX Capital 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 BBX Capital 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 BBX Capital 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 BBX Capital i.e., BBX Capital and Highland Funds go up and down completely randomly.

Pair Corralation between BBX Capital and Highland Funds

Assuming the 90 days horizon BBX Capital is expected to under-perform the Highland Funds. But the otc stock apears to be less risky and, when comparing its historical volatility, BBX Capital is 1.08 times less risky than Highland Funds. The otc stock trades about -0.18 of its potential returns per unit of risk. The Highland Funds I is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,719  in Highland Funds I on October 11, 2024 and sell it today you would lose (26.00) from holding Highland Funds I or give up 1.51% of portfolio value over 90 days.

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

BBX Capital  vs.  Highland Funds I

BBX Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 inconsistent performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BBX Capital and Highland Funds

The main advantage of trading using opposite BBX Capital and Highland Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBX Capital 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 BBX Capital 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.

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.