Correlation Between Highlight Communications and OtelloASA

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

By analyzing existing cross correlation between Highlight Communications AG and Otello ASA, you can compare the effects of market volatilities on Highlight Communications and OtelloASA 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 Highlight Communications with a short position of OtelloASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and OtelloASA.

Diversification Opportunities for Highlight Communications and OtelloASA

-0.02

Correlation Coefficient

Highlight Communications  OtelloASA

Good diversification

The 3 months correlation between Highlight and OtelloASA is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Otello ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otello ASA and Highlight Communications 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 Highlight Communications AG are associated (or correlated) with OtelloASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otello ASA has no effect on the direction of Highlight Communications i.e., Highlight Communications and OtelloASA go up and down completely randomly.

Pair Corralation between Highlight Communications and OtelloASA

Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 1.77 times more return on investment than OtelloASA. However, Highlight Communications is 1.77 times more volatile than Otello ASA. It trades about -0.05 of its potential returns per unit of risk. Otello ASA is currently generating about -0.11 per unit of risk. If you would invest  115.00  in Highlight Communications AG on September 23, 2024 and sell it today you would lose (13.00) from holding Highlight Communications AG or give up 11.3% of portfolio value over 90 days.

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

Highlight Communications AG  vs.  Otello ASA

Highlight Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highlight Communications AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Otello ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otello ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Highlight Communications and OtelloASA

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

The idea behind Highlight Communications AG and Otello ASA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.