Correlation Between Highwood Asset and North American

Can any of the company-specific risk be diversified away by investing in both Highwood Asset and North American 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 Highwood Asset and North American into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Highwood Asset Management and North American Financial, you can compare the effects of market volatilities on Highwood Asset and North American 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 Highwood Asset with a short position of North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highwood Asset and North American.

Diversification Opportunities for Highwood Asset and North American

0.16

Correlation Coefficient

Highwood Asset  North American

Average diversification

The 3 months correlation between Highwood and North is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Highwood Asset Management and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial and Highwood Asset 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 Highwood Asset Management are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Highwood Asset i.e., Highwood Asset and North American go up and down completely randomly.

Pair Corralation between Highwood Asset and North American

Assuming the 90 days horizon Highwood Asset Management is expected to under-perform the North American. In addition to that, Highwood Asset is 1.32 times more volatile than North American Financial. It trades about -0.18 of its total potential returns per unit of risk. North American Financial is currently generating about -0.17 per unit of volatility. If you would invest  748.00  in North American Financial on September 22, 2024 and sell it today you would lose (47.00) from holding North American Financial or give up 6.28% of portfolio value over 90 days.

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

Highwood Asset Management  vs.  North American Financial

Highwood Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highwood Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Highwood Asset is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

North American Financial

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in North American Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, North American displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highwood Asset and North American

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

The idea behind Highwood Asset Management and North American Financial 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.