Correlation Between Highlight Communications and Fresenius

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

Diversification Opportunities for Highlight Communications and Fresenius

0.39

Correlation Coefficient

Highlight Communications  Fresenius

Weak diversification

The 3 months correlation between Highlight and Fresenius is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Fresenius SE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius SE 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 Fresenius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius SE has no effect on the direction of Highlight Communications i.e., Highlight Communications and Fresenius go up and down completely randomly.

Pair Corralation between Highlight Communications and Fresenius

Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 3.7 times more return on investment than Fresenius. However, Highlight Communications is 3.7 times more volatile than Fresenius SE Co. It trades about 0.19 of its potential returns per unit of risk. Fresenius SE Co is currently generating about 0.06 per unit of risk. If you would invest  93.00  in Highlight Communications AG on October 12, 2024 and sell it today you would earn a total of  53.00  from holding Highlight Communications AG or generate 56.99% return on investment over 90 days.

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

Highlight Communications AG  vs.  Fresenius SE Co

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 unsteady technical and fundamental indicators, Highlight Communications unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fresenius SE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fresenius SE Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Fresenius is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Highlight Communications and Fresenius

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

The idea behind Highlight Communications AG and Fresenius SE Co 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.