Correlation Between Highlight Communications and LANDSEA HOMES

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

Diversification Opportunities for Highlight Communications and LANDSEA HOMES

0.07

Correlation Coefficient

Highlight Communications  LANDSEA HOMES

Significant diversification

The 3 months correlation between Highlight and LANDSEA is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and LANDSEA HOMES P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LANDSEA HOMES P 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 LANDSEA HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LANDSEA HOMES P has no effect on the direction of Highlight Communications i.e., Highlight Communications and LANDSEA HOMES go up and down completely randomly.

Pair Corralation between Highlight Communications and LANDSEA HOMES

Assuming the 90 days trading horizon Highlight Communications AG is expected to under-perform the LANDSEA HOMES. In addition to that, Highlight Communications is 1.05 times more volatile than LANDSEA HOMES P. It trades about -0.14 of its total potential returns per unit of risk. LANDSEA HOMES P is currently generating about 0.02 per unit of volatility. If you would invest  835.00  in LANDSEA HOMES P on September 22, 2024 and sell it today you would earn a total of  5.00  from holding LANDSEA HOMES P or generate 0.6% return on investment over 90 days.

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

Highlight Communications AG  vs.  LANDSEA HOMES P

Highlight Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highlight Communications AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

LANDSEA HOMES P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Highlight Communications and LANDSEA HOMES

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

The idea behind Highlight Communications AG and LANDSEA HOMES P 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.