Correlation Between Highland Longshort and Short Duration

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

Diversification Opportunities for Highland Longshort and Short Duration

-0.01

Correlation Coefficient

Highland Longshort  Short Duration

Good diversification

The 3 months correlation between Highland and Short is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Short Duration Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Income 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 Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Income has no effect on the direction of Highland Longshort i.e., Highland Longshort and Short Duration go up and down completely randomly.

Pair Corralation between Highland Longshort and Short Duration

Assuming the 90 days horizon Highland Longshort Healthcare is expected to generate 1.51 times more return on investment than Short Duration. However, Highland Longshort is 1.51 times more volatile than Short Duration Income. It trades about 0.18 of its potential returns per unit of risk. Short Duration Income is currently generating about 0.2 per unit of risk. If you would invest  1,482  in Highland Longshort Healthcare on September 12, 2024 and sell it today you would earn a total of  176.00  from holding Highland Longshort Healthcare or generate 11.88% return on investment over 90 days.

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

Highland Longshort Healthcare  vs.  Short Duration Income

Highland Longshort

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 14 (%) 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.

Short Duration Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Short Duration Income are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Short Duration 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 Short Duration

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

The idea behind Highland Longshort Healthcare and Short Duration Income 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.