Correlation Between Highlight Communications and MOWI ASA

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

Diversification Opportunities for Highlight Communications and MOWI ASA

0.48

Correlation Coefficient

Highlight Communications  MOWI ASA

Very weak diversification

The 3 months correlation between Highlight and MOWI is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and MOWI ASA SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOWI ASA SPADR 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 MOWI ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOWI ASA SPADR has no effect on the direction of Highlight Communications i.e., Highlight Communications and MOWI ASA go up and down completely randomly.

Pair Corralation between Highlight Communications and MOWI ASA

Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 3.27 times more return on investment than MOWI ASA. However, Highlight Communications is 3.27 times more volatile than MOWI ASA SPADR. It trades about 0.19 of its potential returns per unit of risk. MOWI ASA SPADR is currently generating about 0.11 per unit of risk. If you would invest  97.00  in Highlight Communications AG on October 24, 2024 and sell it today you would earn a total of  52.00  from holding Highlight Communications AG or generate 53.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Highlight Communications AG  vs.  MOWI ASA SPADR

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

MOWI ASA SPADR

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MOWI ASA SPADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, MOWI ASA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Highlight Communications and MOWI ASA

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

The idea behind Highlight Communications AG and MOWI ASA SPADR 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.