Correlation Between Highland Long/short and Global Core

Can any of the company-specific risk be diversified away by investing in both Highland Long/short and Global 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 Global 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 Global E Portfolio, you can compare the effects of market volatilities on Highland Long/short and Global 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 Global Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Long/short and Global Core.

Diversification Opportunities for Highland Long/short and Global Core

0.58

Correlation Coefficient

Highland Long/short  Global Core

Very weak diversification

The 3 months correlation between Highland and Global is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Global E Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Portfolio 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 Global Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Portfolio has no effect on the direction of Highland Long/short i.e., Highland Long/short and Global Core go up and down completely randomly.

Pair Corralation between Highland Long/short and Global Core

Assuming the 90 days horizon Highland Longshort Healthcare is expected to generate 0.18 times more return on investment than Global Core. However, Highland Longshort Healthcare is 5.7 times less risky than Global Core. It trades about -0.43 of its potential returns per unit of risk. Global E Portfolio is currently generating about -0.3 per unit of risk. If you would invest  1,662  in Highland Longshort Healthcare on December 10, 2024 and sell it today you would lose (31.00) from holding Highland Longshort Healthcare or give up 1.87% of portfolio value over 90 days.

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

Highland Longshort Healthcare  vs.  Global E Portfolio

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.

Global E Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global E Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Global 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 Global Core

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

The idea behind Highland Longshort Healthcare and Global E Portfolio 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.