Correlation Between Highwood Asset and Rocky Mountain

Can any of the company-specific risk be diversified away by investing in both Highwood Asset and Rocky Mountain 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 Highwood Asset and Rocky Mountain into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Highwood Asset Management and Rocky Mountain Liquor, you can compare the effects of market volatilities on Highwood Asset and Rocky Mountain 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 Highwood Asset with a short position of Rocky Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highwood Asset and Rocky Mountain.

Diversification Opportunities for Highwood Asset and Rocky Mountain

-0.05

Correlation Coefficient

Highwood Asset  Rocky Mountain

Good diversification

The 3 months correlation between Highwood and Rocky is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Highwood Asset Management and Rocky Mountain Liquor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Liquor and Highwood Asset 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 Highwood Asset Management are associated (or correlated) with Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Liquor has no effect on the direction of Highwood Asset i.e., Highwood Asset and Rocky Mountain go up and down completely randomly.

Pair Corralation between Highwood Asset and Rocky Mountain

Assuming the 90 days horizon Highwood Asset Management is expected to under-perform the Rocky Mountain. But the stock apears to be less risky and, when comparing its historical volatility, Highwood Asset Management is 1.37 times less risky than Rocky Mountain. The stock trades about -0.01 of its potential returns per unit of risk. The Rocky Mountain Liquor is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Rocky Mountain Liquor on October 4, 2024 and sell it today you would lose (5.00) from holding Rocky Mountain Liquor or give up 35.71% of portfolio value over 90 days.

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

Highwood Asset Management  vs.  Rocky Mountain Liquor

Highwood Asset Management

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highwood Asset Management are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Highwood Asset is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Rocky Mountain Liquor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rocky Mountain Liquor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Highwood Asset and Rocky Mountain

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

The idea behind Highwood Asset Management and Rocky Mountain Liquor 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..