Correlation Between Highland Long/short and Invesco Core

Can any of the company-specific risk be diversified away by investing in both Highland Long/short and Invesco Core 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 Long/short and Invesco Core into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Highland Longshort Healthcare and Invesco E Plus, you can compare the effects of market volatilities on Highland Long/short and Invesco Core 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 Long/short with a short position of Invesco Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Long/short and Invesco Core.

Diversification Opportunities for Highland Long/short and Invesco Core

-0.46

Correlation Coefficient

Highland Long/short  Invesco Core

Very good diversification

The 3 months correlation between Highland and Invesco is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Invesco E Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco E Plus and Highland Long/short 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 Longshort Healthcare are associated (or correlated) with Invesco Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco E Plus has no effect on the direction of Highland Long/short i.e., Highland Long/short and Invesco Core go up and down completely randomly.

Pair Corralation between Highland Long/short and Invesco Core

Assuming the 90 days horizon Highland Longshort Healthcare is expected to under-perform the Invesco Core. But the mutual fund apears to be less risky and, when comparing its historical volatility, Highland Longshort Healthcare is 1.21 times less risky than Invesco Core. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Invesco E Plus is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  901.00  in Invesco E Plus on December 29, 2024 and sell it today you would earn a total of  19.00  from holding Invesco E Plus or generate 2.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Highland Longshort Healthcare  vs.  Invesco E Plus

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.

Invesco E Plus

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco E Plus are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Invesco Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Highland Long/short and Invesco Core

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

The idea behind Highland Longshort Healthcare and Invesco E Plus 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.