Correlation Between Highland Long/short and Aqr International

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

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

Diversification Opportunities for Highland Long/short and Aqr International

-0.74

Correlation Coefficient

Highland Long/short  Aqr International

Pay attention - limited upside

The 3 months correlation between Highland and Aqr is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Aqr International Defensive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr International and Highland Long/short 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 Longshort Healthcare are associated (or correlated) with Aqr International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr International has no effect on the direction of Highland Long/short i.e., Highland Long/short and Aqr International go up and down completely randomly.

Pair Corralation between Highland Long/short and Aqr International

Assuming the 90 days horizon Highland Long/short is expected to generate 1.39 times less return on investment than Aqr International. But when comparing it to its historical volatility, Highland Longshort Healthcare is 3.9 times less risky than Aqr International. It trades about 0.17 of its potential returns per unit of risk. Aqr International Defensive is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,340  in Aqr International Defensive on September 4, 2024 and sell it today you would earn a total of  145.00  from holding Aqr International Defensive or generate 10.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Highland Longshort Healthcare  vs.  Aqr International Defensive

Highland Long/short

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Highland Long/short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aqr International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr International Defensive has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aqr International 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 Long/short and Aqr International

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

The idea behind Highland Longshort Healthcare and Aqr International Defensive 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.