Correlation Between Highland Longshort and New Perspective

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Can any of the company-specific risk be diversified away by investing in both Highland Longshort and New Perspective 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 New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Highland Longshort and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Longshort and New Perspective.

Diversification Opportunities for Highland Longshort and New Perspective

0.39
  Correlation Coefficient

Weak diversification

The 3 months correlation between Highland and New is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Highland Longshort i.e., Highland Longshort and New Perspective go up and down completely randomly.

Pair Corralation between Highland Longshort and New Perspective

Assuming the 90 days horizon Highland Longshort Healthcare is expected to generate 0.21 times more return on investment than New Perspective. However, Highland Longshort Healthcare is 4.81 times less risky than New Perspective. It trades about 0.07 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.01 per unit of risk. If you would invest  1,610  in Highland Longshort Healthcare on September 29, 2024 and sell it today you would earn a total of  29.00  from holding Highland Longshort Healthcare or generate 1.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Highland Longshort Healthcare  vs.  New Perspective Fund

 Performance 
       Timeline  
Highland Longshort 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 Longshort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
New Perspective 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days New Perspective Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, New Perspective is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Highland Longshort and New Perspective Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Highland Longshort and New Perspective

The main advantage of trading using opposite Highland Longshort and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Longshort position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective's long position.
The idea behind Highland Longshort Healthcare and New Perspective Fund 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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