Correlation Between Global Concentrated and Highland Longshort

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

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

Diversification Opportunities for Global Concentrated and Highland Longshort

0.91

Correlation Coefficient

Global Concentrated  Highland Longshort

Almost no diversification

The 3 months correlation between Global and Highland is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Global Centrated Portfolio and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Longshort and Global Concentrated 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 Global Centrated Portfolio are associated (or correlated) with Highland Longshort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highland Longshort has no effect on the direction of Global Concentrated i.e., Global Concentrated and Highland Longshort go up and down completely randomly.

Pair Corralation between Global Concentrated and Highland Longshort

Assuming the 90 days horizon Global Centrated Portfolio is expected to generate 3.96 times more return on investment than Highland Longshort. However, Global Concentrated is 3.96 times more volatile than Highland Longshort Healthcare. It trades about 0.16 of its potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.2 per unit of risk. If you would invest  2,141  in Global Centrated Portfolio on September 1, 2024 and sell it today you would earn a total of  185.00  from holding Global Centrated Portfolio or generate 8.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Global Centrated Portfolio  vs.  Highland Longshort Healthcare

Global Centrated Por

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Centrated Portfolio are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Global Concentrated may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Highland Longshort

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 15 (%) 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.

Pair Trading with Global Concentrated and Highland Longshort

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

The idea behind Global Centrated Portfolio and Highland Longshort Healthcare 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.