Correlation Between Bank Ozk and Highland Funds

Can any of the company-specific risk be diversified away by investing in both Bank Ozk and Highland Funds 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 Bank Ozk and Highland Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank Ozk and Highland Funds I, you can compare the effects of market volatilities on Bank Ozk and Highland Funds 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 Bank Ozk with a short position of Highland Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Ozk and Highland Funds.

Diversification Opportunities for Bank Ozk and Highland Funds

-0.6

Correlation Coefficient

Bank Ozk  Highland Funds

Excellent diversification

The 3 months correlation between Bank and Highland is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bank Ozk and Highland Funds I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Funds I and Bank Ozk 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 Bank Ozk are associated (or correlated) with Highland Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Funds I has no effect on the direction of Bank Ozk i.e., Bank Ozk and Highland Funds go up and down completely randomly.

Pair Corralation between Bank Ozk and Highland Funds

Considering the 90-day investment horizon Bank Ozk is expected to generate 2.5 times more return on investment than Highland Funds. However, Bank Ozk is 2.5 times more volatile than Highland Funds I. It trades about 0.07 of its potential returns per unit of risk. Highland Funds I is currently generating about -0.3 per unit of risk. If you would invest  4,027  in Bank Ozk on September 25, 2024 and sell it today you would earn a total of  356.00  from holding Bank Ozk or generate 8.84% return on investment over 90 days.

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

Bank Ozk  vs.  Highland Funds I

Bank Ozk

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Ozk are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent basic indicators, Bank Ozk may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Highland Funds I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highland Funds I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bank Ozk and Highland Funds

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

The idea behind Bank Ozk and Highland Funds I 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.