Correlation Between Highlight Communications and FOX CORP

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

Diversification Opportunities for Highlight Communications and FOX CORP

0.77

Correlation Coefficient

Highlight Communications  FOX CORP

Poor diversification

The 3 months correlation between Highlight and FOX is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and FOX P B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FOX CORP 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 FOX CORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FOX CORP has no effect on the direction of Highlight Communications i.e., Highlight Communications and FOX CORP go up and down completely randomly.

Pair Corralation between Highlight Communications and FOX CORP

Assuming the 90 days trading horizon Highlight Communications AG is expected to under-perform the FOX CORP. In addition to that, Highlight Communications is 2.65 times more volatile than FOX P B. It trades about -0.05 of its total potential returns per unit of risk. FOX P B is currently generating about 0.21 per unit of volatility. If you would invest  2,818  in FOX P B on October 13, 2024 and sell it today you would earn a total of  1,662  from holding FOX P B or generate 58.98% return on investment over 90 days.

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

Highlight Communications AG  vs.  FOX P B

Highlight Communications

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 15 (%) 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.

FOX CORP

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FOX P B are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FOX CORP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highlight Communications and FOX CORP

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

The idea behind Highlight Communications AG and FOX P B 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.