Correlation Between WILLIS LEASE and Highlight Communications

Can any of the company-specific risk be diversified away by investing in both WILLIS LEASE and Highlight Communications 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 WILLIS LEASE and Highlight Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WILLIS LEASE FIN and Highlight Communications AG, you can compare the effects of market volatilities on WILLIS LEASE and Highlight Communications 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 WILLIS LEASE with a short position of Highlight Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of WILLIS LEASE and Highlight Communications.

Diversification Opportunities for WILLIS LEASE and Highlight Communications

-0.71

Correlation Coefficient

WILLIS LEASE  Highlight Communications

Pay attention - limited upside

The 3 months correlation between WILLIS and Highlight is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and Highlight Communications AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlight Communications and WILLIS LEASE 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 WILLIS LEASE FIN are associated (or correlated) with Highlight Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlight Communications has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and Highlight Communications go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Highlight Communications

Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 1.13 times more return on investment than Highlight Communications. However, WILLIS LEASE is 1.13 times more volatile than Highlight Communications AG. It trades about 0.28 of its potential returns per unit of risk. Highlight Communications AG is currently generating about -0.09 per unit of risk. If you would invest  9,738  in WILLIS LEASE FIN on August 31, 2024 and sell it today you would earn a total of  11,062  from holding WILLIS LEASE FIN or generate 113.6% return on investment over 90 days.

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

WILLIS LEASE FIN  vs.  Highlight Communications AG

WILLIS LEASE FIN

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

Highlight Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highlight Communications AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with WILLIS LEASE and Highlight Communications

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

The idea behind WILLIS LEASE FIN and Highlight Communications AG 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.