Correlation Between Highlight Communications and Linde Plc

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

Diversification Opportunities for Highlight Communications and Linde Plc

-0.39

Correlation Coefficient

Highlight Communications  Linde Plc

Very good diversification

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

Pair Corralation between Highlight Communications and Linde Plc

Assuming the 90 days trading horizon Highlight Communications AG is expected to under-perform the Linde Plc. In addition to that, Highlight Communications is 3.76 times more volatile than Linde plc. It trades about -0.07 of its total potential returns per unit of risk. Linde plc is currently generating about -0.02 per unit of volatility. If you would invest  41,387  in Linde plc on October 8, 2024 and sell it today you would lose (1,587) from holding Linde plc or give up 3.83% of portfolio value over 90 days.

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

Highlight Communications AG  vs.  Linde plc

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.

Linde plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Linde plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Linde Plc is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Highlight Communications and Linde Plc

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

The idea behind Highlight Communications AG and Linde plc 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.