Correlation Between Montauk Renewables and Highland Longshort

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

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

Diversification Opportunities for Montauk Renewables and Highland Longshort

-0.93

Correlation Coefficient

Montauk Renewables  Highland Longshort

Pay attention - limited upside

The 3 months correlation between Montauk and Highland is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Highland Longshort Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highland Longshort and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and Highland Longshort go up and down completely randomly.

Pair Corralation between Montauk Renewables and Highland Longshort

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Highland Longshort. In addition to that, Montauk Renewables is 18.35 times more volatile than Highland Longshort Healthcare. It trades about -0.03 of its total potential returns per unit of risk. Highland Longshort Healthcare is currently generating about 0.1 per unit of volatility. If you would invest  1,357  in Highland Longshort Healthcare on February 6, 2024 and sell it today you would earn a total of  172.00  from holding Highland Longshort Healthcare or generate 12.68% return on investment over 90 days.

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

Montauk Renewables  vs.  Highland Longshort Healthcare

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Highland Longshort

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Highland Longshort Healthcare are ranked lower than 27 (%) 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 Montauk Renewables and Highland Longshort

The main advantage of trading using opposite Montauk Renewables and Highland Longshort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.