Correlation Between Gap, and Highway Holdings

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

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

Diversification Opportunities for Gap, and Highway Holdings

0.31

Correlation Coefficient

Gap,  Highway Holdings

Weak diversification

The 3 months correlation between Gap, and Highway is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings and Gap, 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 The Gap, 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 Gap, i.e., Gap, and Highway Holdings go up and down completely randomly.

Pair Corralation between Gap, and Highway Holdings

Considering the 90-day investment horizon Gap, is expected to generate 12.63 times less return on investment than Highway Holdings. But when comparing it to its historical volatility, The Gap, is 1.22 times less risky than Highway Holdings. It trades about 0.0 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  180.00  in Highway Holdings Limited on December 5, 2024 and sell it today you would earn a total of  4.00  from holding Highway Holdings Limited or generate 2.22% return on investment over 90 days.

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

The Gap,  vs.  Highway Holdings Limited

Gap,

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Gap, has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail 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 Gap, and Highway Holdings

The main advantage of trading using opposite Gap, and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..