Correlation Between Highland Longshort and Six Circles

Can any of the company-specific risk be diversified away by investing in both Highland Longshort and Six Circles 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 Longshort and Six Circles 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 Six Circles Ultra, you can compare the effects of market volatilities on Highland Longshort and Six Circles 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 Longshort with a short position of Six Circles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Longshort and Six Circles.

Diversification Opportunities for Highland Longshort and Six Circles

0.86

Correlation Coefficient

Highland Longshort  Six Circles

Very poor diversification

The 3 months correlation between Highland and Six is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Six Circles Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Circles Ultra and Highland Longshort 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 Six Circles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Circles Ultra has no effect on the direction of Highland Longshort i.e., Highland Longshort and Six Circles go up and down completely randomly.

Pair Corralation between Highland Longshort and Six Circles

Assuming the 90 days horizon Highland Longshort Healthcare is expected to generate 2.74 times more return on investment than Six Circles. However, Highland Longshort is 2.74 times more volatile than Six Circles Ultra. It trades about 0.16 of its potential returns per unit of risk. Six Circles Ultra is currently generating about 0.16 per unit of risk. If you would invest  1,625  in Highland Longshort Healthcare on September 15, 2024 and sell it today you would earn a total of  31.00  from holding Highland Longshort Healthcare or generate 1.91% return on investment over 90 days.

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

Highland Longshort Healthcare  vs.  Six Circles Ultra

Highland Longshort

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Highland Longshort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Six Circles Ultra

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Six Circles Ultra are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Six Circles 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 Longshort and Six Circles

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

The idea behind Highland Longshort Healthcare and Six Circles Ultra 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.