Correlation Between Highway Holdings and ABG Acquisition

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

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

Diversification Opportunities for Highway Holdings and ABG Acquisition

0.05

Correlation Coefficient

Highway Holdings  ABG Acquisition

Significant diversification

The 3 months correlation between Highway and ABG is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and ABG Acquisition I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABG Acquisition I and Highway Holdings 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 Highway Holdings Limited are associated (or correlated) with ABG Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABG Acquisition I has no effect on the direction of Highway Holdings i.e., Highway Holdings and ABG Acquisition go up and down completely randomly.

Pair Corralation between Highway Holdings and ABG Acquisition

Given the investment horizon of 90 days Highway Holdings is expected to generate 1.42 times less return on investment than ABG Acquisition. In addition to that, Highway Holdings is 30.0 times more volatile than ABG Acquisition I. It trades about 0.01 of its total potential returns per unit of risk. ABG Acquisition I is currently generating about 0.29 per unit of volatility. If you would invest  1,015  in ABG Acquisition I on October 23, 2024 and sell it today you would earn a total of  5.00  from holding ABG Acquisition I or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	3.65%
Values	Daily Returns

Highway Holdings Limited  vs.  ABG Acquisition I

Highway Holdings

Risk-Adjusted Performance

0 of 100

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 unfluctuating performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ABG Acquisition I

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ABG Acquisition I has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, ABG Acquisition is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Highway Holdings and ABG Acquisition

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

The idea behind Highway Holdings Limited and ABG Acquisition I 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.