Correlation Between Highstreet and Marlin

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

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

Diversification Opportunities for Highstreet and Marlin

0.25

Correlation Coefficient

Highstreet  Marlin

Modest diversification

The 3 months correlation between Highstreet and Marlin is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Highstreet and Marlin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marlin and Highstreet 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 Highstreet are associated (or correlated) with Marlin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marlin has no effect on the direction of Highstreet i.e., Highstreet and Marlin go up and down completely randomly.

Pair Corralation between Highstreet and Marlin

Assuming the 90 days trading horizon Highstreet is expected to generate 1.46 times more return on investment than Marlin. However, Highstreet is 1.46 times more volatile than Marlin. It trades about 0.29 of its potential returns per unit of risk. Marlin is currently generating about -0.2 per unit of risk. If you would invest  263.00  in Highstreet on January 30, 2024 and sell it today you would earn a total of  163.00  from holding Highstreet or generate 61.98% return on investment over 90 days.

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

Highstreet  vs.  Marlin

Highstreet

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Highstreet are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Highstreet exhibited solid returns over the last few months and may actually be approaching a breakup point.

Marlin

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marlin are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Marlin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highstreet and Marlin

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

The idea behind Highstreet and Marlin 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.