Correlation Between Vaughan Nelson and Highland Longshort

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

By analyzing existing cross correlation between Vaughan Nelson Select and Highland Longshort Healthcare, you can compare the effects of market volatilities on Vaughan Nelson and Highland Longshort 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 Vaughan Nelson with a short position of Highland Longshort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vaughan Nelson and Highland Longshort.

Diversification Opportunities for Vaughan Nelson and Highland Longshort

0.9

Correlation Coefficient

Vaughan Nelson  Highland Longshort

Almost no diversification

The 3 months correlation between Vaughan and Highland is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Vaughan Nelson Select and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Longshort and Vaughan Nelson 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 Vaughan Nelson Select are associated (or correlated) with Highland Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Longshort has no effect on the direction of Vaughan Nelson i.e., Vaughan Nelson and Highland Longshort go up and down completely randomly.

Pair Corralation between Vaughan Nelson and Highland Longshort

Assuming the 90 days horizon Vaughan Nelson Select is expected to under-perform the Highland Longshort. In addition to that, Vaughan Nelson is 5.05 times more volatile than Highland Longshort Healthcare. It trades about -0.09 of its total potential returns per unit of risk. Highland Longshort Healthcare is currently generating about -0.02 per unit of volatility. If you would invest  1,638  in Highland Longshort Healthcare on December 21, 2024 and sell it today you would lose (4.00) from holding Highland Longshort Healthcare or give up 0.24% of portfolio value over 90 days.

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

Vaughan Nelson Select  vs.  Highland Longshort Healthcare

Vaughan Nelson Select

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vaughan Nelson Select has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vaughan Nelson is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Highland Longshort

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highland Longshort Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Highland Longshort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vaughan Nelson and Highland Longshort

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

The idea behind Vaughan Nelson Select and Highland Longshort Healthcare 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.