Correlation Between Highlight Communications and ALD SA

Can any of the company-specific risk be diversified away by investing in both Highlight Communications and ALD SA 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 Highlight Communications and ALD SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Highlight Communications AG and ALD SA, you can compare the effects of market volatilities on Highlight Communications and ALD SA 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 Highlight Communications with a short position of ALD SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and ALD SA.

Diversification Opportunities for Highlight Communications and ALD SA

-0.15

Correlation Coefficient

Highlight Communications  ALD SA

Good diversification

The 3 months correlation between Highlight and ALD is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and ALD SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALD SA and Highlight Communications 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 Highlight Communications AG are associated (or correlated) with ALD SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALD SA has no effect on the direction of Highlight Communications i.e., Highlight Communications and ALD SA go up and down completely randomly.

Pair Corralation between Highlight Communications and ALD SA

Assuming the 90 days trading horizon Highlight Communications is expected to generate 1.2 times less return on investment than ALD SA. In addition to that, Highlight Communications is 1.55 times more volatile than ALD SA. It trades about 0.05 of its total potential returns per unit of risk. ALD SA is currently generating about 0.1 per unit of volatility. If you would invest  596.00  in ALD SA on September 27, 2024 and sell it today you would earn a total of  25.00  from holding ALD SA or generate 4.19% return on investment over 90 days.

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

Highlight Communications AG  vs.  ALD SA

Highlight Communications

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Highlight Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ALD SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ALD SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ALD SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Highlight Communications and ALD SA

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

The idea behind Highlight Communications AG and ALD SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.