Correlation Between Highland Longshort and Total Return

Can any of the company-specific risk be diversified away by investing in both Highland Longshort and Total Return 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 Longshort and Total Return 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 Total Return Bond, you can compare the effects of market volatilities on Highland Longshort and Total Return 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 Longshort with a short position of Total Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highland Longshort and Total Return.

Diversification Opportunities for Highland Longshort and Total Return

0.54

Correlation Coefficient

Highland Longshort  Total Return

Very weak diversification

The 3 months correlation between Highland and Total is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Highland Longshort Healthcare and Total Return Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return Bond and Highland Longshort 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 Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return Bond has no effect on the direction of Highland Longshort i.e., Highland Longshort and Total Return go up and down completely randomly.

Pair Corralation between Highland Longshort and Total Return

Assuming the 90 days horizon Highland Longshort Healthcare is expected to generate 1.84 times more return on investment than Total Return. However, Highland Longshort is 1.84 times more volatile than Total Return Bond. It trades about 0.19 of its potential returns per unit of risk. Total Return Bond is currently generating about 0.19 per unit of risk. If you would invest  1,619  in Highland Longshort Healthcare on September 12, 2024 and sell it today you would earn a total of  39.00  from holding Highland Longshort Healthcare or generate 2.41% return on investment over 90 days.

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

Highland Longshort Healthcare  vs.  Total Return Bond

Highland Longshort

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 Longshort is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Total Return Bond

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Total Return Bond are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Total Return 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 Longshort and Total Return

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

The idea behind Highland Longshort Healthcare and Total Return Bond 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.