Correlation Between Highlight Communications and VeriSign

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

Diversification Opportunities for Highlight Communications and VeriSign

0.64

Correlation Coefficient

Highlight Communications  VeriSign

Poor diversification

The 3 months correlation between Highlight and VeriSign is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign 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 VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of Highlight Communications i.e., Highlight Communications and VeriSign go up and down completely randomly.

Pair Corralation between Highlight Communications and VeriSign

Assuming the 90 days trading horizon Highlight Communications AG is expected to under-perform the VeriSign. In addition to that, Highlight Communications is 2.03 times more volatile than VeriSign. It trades about -0.05 of its total potential returns per unit of risk. VeriSign is currently generating about 0.01 per unit of volatility. If you would invest  20,530  in VeriSign on October 22, 2024 and sell it today you would lose (260.00) from holding VeriSign or give up 1.27% of portfolio value over 90 days.

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

Highlight Communications AG  vs.  VeriSign

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

VeriSign

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VeriSign reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highlight Communications and VeriSign

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

The idea behind Highlight Communications AG and VeriSign 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.