Correlation Between Highlight Communications and NEW PACIFIC

Can any of the company-specific risk be diversified away by investing in both Highlight Communications and NEW PACIFIC 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 NEW PACIFIC 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 NEW PACIFIC METALS, you can compare the effects of market volatilities on Highlight Communications and NEW PACIFIC 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 NEW PACIFIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and NEW PACIFIC.

Diversification Opportunities for Highlight Communications and NEW PACIFIC

-0.66

Correlation Coefficient

Highlight Communications  NEW PACIFIC

Excellent diversification

The 3 months correlation between Highlight and NEW is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and NEW PACIFIC METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEW PACIFIC METALS 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 NEW PACIFIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEW PACIFIC METALS has no effect on the direction of Highlight Communications i.e., Highlight Communications and NEW PACIFIC go up and down completely randomly.

Pair Corralation between Highlight Communications and NEW PACIFIC

Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 0.71 times more return on investment than NEW PACIFIC. However, Highlight Communications AG is 1.4 times less risky than NEW PACIFIC. It trades about 0.19 of its potential returns per unit of risk. NEW PACIFIC METALS is currently generating about -0.06 per unit of risk. If you would invest  97.00  in Highlight Communications AG on October 21, 2024 and sell it today you would earn a total of  55.00  from holding Highlight Communications AG or generate 56.7% return on investment over 90 days.

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

Highlight Communications AG  vs.  NEW PACIFIC METALS

Highlight Communications

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Highlight Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

NEW PACIFIC METALS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEW PACIFIC METALS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Highlight Communications and NEW PACIFIC

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

The idea behind Highlight Communications AG and NEW PACIFIC METALS 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.