Correlation Between Highland Long/short and Deutsche Health

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

Diversification Opportunities for Highland Long/short and Deutsche Health

0.67

Correlation Coefficient

Highland Long/short  Deutsche Health

Poor diversification

The 3 months correlation between Highland and Deutsche is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Deutsche Health And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Health And 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 Deutsche Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Health And has no effect on the direction of Highland Long/short i.e., Highland Long/short and Deutsche Health go up and down completely randomly.

Pair Corralation between Highland Long/short and Deutsche Health

Assuming the 90 days horizon Highland Longshort Healthcare is expected to under-perform the Deutsche Health. But the mutual fund apears to be less risky and, when comparing its historical volatility, Highland Longshort Healthcare is 4.2 times less risky than Deutsche Health. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Deutsche Health And is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,366  in Deutsche Health And on November 28, 2024 and sell it today you would lose (35.00) from holding Deutsche Health And or give up 0.8% of portfolio value over 90 days.

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

Highland Longshort Healthcare  vs.  Deutsche Health And

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.

Deutsche Health And

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Highland Longshort Healthcare and Deutsche Health And 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.