Correlation Between Acme United and Highway Holdings

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

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

Diversification Opportunities for Acme United and Highway Holdings

-0.17

Correlation Coefficient

Acme United  Highway Holdings

Good diversification

The 3 months correlation between Acme and Highway is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Acme United and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings and Acme United 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 Acme United are associated (or correlated) with Highway Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway Holdings has no effect on the direction of Acme United i.e., Acme United and Highway Holdings go up and down completely randomly.

Pair Corralation between Acme United and Highway Holdings

Considering the 90-day investment horizon Acme United is expected to generate 0.93 times more return on investment than Highway Holdings. However, Acme United is 1.07 times less risky than Highway Holdings. It trades about 0.01 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.0 per unit of risk. If you would invest  3,929  in Acme United on December 2, 2024 and sell it today you would lose (20.00) from holding Acme United or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Acme United  vs.  Highway Holdings Limited

Acme United

Risk-Adjusted Performance

Very Weak

Over the last 90 days Acme United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's 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.

Highway Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Highway Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Highway Holdings is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Acme United and Highway Holdings

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

The idea behind Acme United and Highway Holdings Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.