Correlation Between Highlands Bankshares and Sphere Entertainment

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

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

Diversification Opportunities for Highlands Bankshares and Sphere Entertainment

-0.33

Correlation Coefficient

Highlands Bankshares  Sphere Entertainment

Very good diversification

The 3 months correlation between Highlands and Sphere is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Highlands Bankshares and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment and Highlands Bankshares 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 Highlands Bankshares are associated (or correlated) with Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of Highlands Bankshares i.e., Highlands Bankshares and Sphere Entertainment go up and down completely randomly.

Pair Corralation between Highlands Bankshares and Sphere Entertainment

Given the investment horizon of 90 days Highlands Bankshares is expected to generate 0.14 times more return on investment than Sphere Entertainment. However, Highlands Bankshares is 6.96 times less risky than Sphere Entertainment. It trades about 0.29 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.34 per unit of risk. If you would invest  3,550  in Highlands Bankshares on January 28, 2024 and sell it today you would earn a total of  50.00  from holding Highlands Bankshares or generate 1.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	57.14%
Values	Daily Returns

Highlands Bankshares  vs.  Sphere Entertainment Co

Highlands Bankshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highlands Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Sphere Entertainment

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sphere Entertainment Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish technical indicators, Sphere Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highlands Bankshares and Sphere Entertainment

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

The idea behind Highlands Bankshares and Sphere Entertainment Co 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.