Correlation Between Highland Longshort and Health Care

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

Diversification Opportunities for Highland Longshort and Health Care

-0.71

Correlation Coefficient

Highland Longshort  Health Care

Pay attention - limited upside

The 3 months correlation between Highland and HEALTH is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Health Care Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Fund 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Fund has no effect on the direction of Highland Longshort i.e., Highland Longshort and Health Care go up and down completely randomly.

Pair Corralation between Highland Longshort and Health Care

Assuming the 90 days horizon Highland Longshort Healthcare is expected to generate 0.29 times more return on investment than Health Care. However, Highland Longshort Healthcare is 3.5 times less risky than Health Care. It trades about 0.2 of its potential returns per unit of risk. Health Care Fund is currently generating about -0.09 per unit of risk. If you would invest  1,621  in Highland Longshort Healthcare on September 2, 2024 and sell it today you would earn a total of  42.00  from holding Highland Longshort Healthcare or generate 2.59% return on investment over 90 days.

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

Highland Longshort Healthcare  vs.  Health Care Fund

Highland Longshort

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 15 (%) 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.

Health Care Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Health Care Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Health Care 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 Health Care

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

The idea behind Highland Longshort Healthcare and Health Care 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.