Correlation Between Highlight Communications and Stanley Black

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

Diversification Opportunities for Highlight Communications and Stanley Black

0.31

Correlation Coefficient

Highlight Communications  Stanley Black

Weak diversification

The 3 months correlation between Highlight and Stanley is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Stanley Black Decker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stanley Black Decker 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 Stanley Black. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stanley Black Decker has no effect on the direction of Highlight Communications i.e., Highlight Communications and Stanley Black go up and down completely randomly.

Pair Corralation between Highlight Communications and Stanley Black

Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 2.82 times more return on investment than Stanley Black. However, Highlight Communications is 2.82 times more volatile than Stanley Black Decker. It trades about 0.05 of its potential returns per unit of risk. Stanley Black Decker is currently generating about -0.05 per unit of risk. If you would invest  111.00  in Highlight Communications AG on December 23, 2024 and sell it today you would earn a total of  11.00  from holding Highlight Communications AG or generate 9.91% 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.  Stanley Black Decker

Highlight Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highlight Communications AG are ranked lower than 4 (%) 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.

Stanley Black Decker

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stanley Black Decker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Stanley Black is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Highlight Communications and Stanley Black

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

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