Correlation Between Highland Floating and Alliancebernstein

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

By analyzing existing cross correlation between Highland Floating Rate and Alliancebernstein National Municipal, you can compare the effects of market volatilities on Highland Floating and Alliancebernstein 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 Highland Floating with a short position of Alliancebernstein. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Floating and Alliancebernstein.

Diversification Opportunities for Highland Floating and Alliancebernstein

0.79

Correlation Coefficient

Highland Floating  Alliancebernstein

Poor diversification

The 3 months correlation between Highland and Alliancebernstein is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Highland Floating Rate and Alliancebernstein National Mun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliancebernstein and Highland Floating 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 Highland Floating Rate are associated (or correlated) with Alliancebernstein. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliancebernstein has no effect on the direction of Highland Floating i.e., Highland Floating and Alliancebernstein go up and down completely randomly.

Pair Corralation between Highland Floating and Alliancebernstein

Given the investment horizon of 90 days Highland Floating Rate is expected to under-perform the Alliancebernstein. In addition to that, Highland Floating is 2.41 times more volatile than Alliancebernstein National Municipal. It trades about -0.05 of its total potential returns per unit of risk. Alliancebernstein National Municipal is currently generating about -0.01 per unit of volatility. If you would invest  1,155  in Alliancebernstein National Municipal on September 13, 2024 and sell it today you would lose (4.00) from holding Alliancebernstein National Municipal or give up 0.35% of portfolio value over 90 days.

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

Highland Floating Rate  vs.  Alliancebernstein National Mun

Highland Floating Rate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alliancebernstein

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliancebernstein National Municipal has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong technical and fundamental indicators, Alliancebernstein is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Highland Floating and Alliancebernstein

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

The idea behind Highland Floating Rate and Alliancebernstein National Municipal 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.