Correlation Between Eaton Vance and Highland Longshort

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

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

Diversification Opportunities for Eaton Vance and Highland Longshort

0.83

Correlation Coefficient

Eaton Vance  Highland Longshort

Very poor diversification

The 3 months correlation between Eaton and Highland is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Eaton Vance Stock and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Longshort and Eaton Vance 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 Eaton Vance Stock 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 Eaton Vance i.e., Eaton Vance and Highland Longshort go up and down completely randomly.

Pair Corralation between Eaton Vance and Highland Longshort

Assuming the 90 days horizon Eaton Vance Stock is expected to generate 3.84 times more return on investment than Highland Longshort. However, Eaton Vance is 3.84 times more volatile than Highland Longshort Healthcare. It trades about 0.15 of its potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.16 per unit of risk. If you would invest  2,320  in Eaton Vance Stock on September 14, 2024 and sell it today you would earn a total of  157.00  from holding Eaton Vance Stock or generate 6.77% return on investment over 90 days.

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

Eaton Vance Stock  vs.  Highland Longshort Healthcare

Eaton Vance Stock

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Stock are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Eaton Vance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Highland Longshort

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. 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 Eaton Vance and Highland Longshort

The main advantage of trading using opposite Eaton Vance and Highland Longshort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eaton Vance 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 Eaton Vance Stock 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.