Correlation Between Highwood Asset and Paramount Resources

Can any of the company-specific risk be diversified away by investing in both Highwood Asset and Paramount Resources 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 Paramount Resources 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 Paramount Resources, you can compare the effects of market volatilities on Highwood Asset and Paramount Resources 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 Paramount Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highwood Asset and Paramount Resources.

Diversification Opportunities for Highwood Asset and Paramount Resources

0.22

Correlation Coefficient

Highwood Asset  Paramount Resources

Modest diversification

The 3 months correlation between Highwood and Paramount is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Highwood Asset Management and Paramount Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paramount Resources 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 Paramount Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paramount Resources has no effect on the direction of Highwood Asset i.e., Highwood Asset and Paramount Resources go up and down completely randomly.

Pair Corralation between Highwood Asset and Paramount Resources

Assuming the 90 days horizon Highwood Asset Management is expected to under-perform the Paramount Resources. In addition to that, Highwood Asset is 1.94 times more volatile than Paramount Resources. It trades about -0.01 of its total potential returns per unit of risk. Paramount Resources is currently generating about 0.04 per unit of volatility. If you would invest  2,212  in Paramount Resources on September 26, 2024 and sell it today you would earn a total of  894.00  from holding Paramount Resources or generate 40.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Highwood Asset Management  vs.  Paramount Resources

Highwood Asset Management

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highwood Asset Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Highwood Asset may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Paramount Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paramount Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Paramount Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highwood Asset and Paramount Resources

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

The idea behind Highwood Asset Management and Paramount Resources 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.