Correlation Between Highland Funds and Azimut Holding

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

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

Diversification Opportunities for Highland Funds and Azimut Holding

0.09

Correlation Coefficient

Highland Funds  Azimut Holding

Significant diversification

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

Pair Corralation between Highland Funds and Azimut Holding

Assuming the 90 days trading horizon Highland Funds I is expected to under-perform the Azimut Holding. But the preferred stock apears to be less risky and, when comparing its historical volatility, Highland Funds I is 2.83 times less risky than Azimut Holding. The preferred stock trades about -0.18 of its potential returns per unit of risk. The Azimut Holding SpA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,658  in Azimut Holding SpA on October 26, 2024 and sell it today you would lose (41.00) from holding Azimut Holding SpA or give up 1.54% of portfolio value over 90 days.

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

Highland Funds I  vs.  Azimut Holding SpA

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 weak 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.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Highland Funds and Azimut Holding

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

The idea behind Highland Funds I and Azimut Holding SpA 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 Transaction History module to view history of all your transactions and understand their impact on performance.