Correlation Between Highway Holdings and Boeing

Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Boeing 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 Boeing 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 The Boeing, you can compare the effects of market volatilities on Highway Holdings and Boeing 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 Boeing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Boeing.

Diversification Opportunities for Highway Holdings and Boeing

-0.24

Correlation Coefficient

Highway Holdings  Boeing

Very good diversification

The 3 months correlation between Highway and Boeing is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and The Boeing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boeing 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 Boeing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boeing has no effect on the direction of Highway Holdings i.e., Highway Holdings and Boeing go up and down completely randomly.

Pair Corralation between Highway Holdings and Boeing

Given the investment horizon of 90 days Highway Holdings Limited is expected to generate 2.25 times more return on investment than Boeing. However, Highway Holdings is 2.25 times more volatile than The Boeing. It trades about 0.05 of its potential returns per unit of risk. The Boeing is currently generating about -0.02 per unit of risk. If you would invest  181.00  in Highway Holdings Limited on September 3, 2024 and sell it today you would earn a total of  17.00  from holding Highway Holdings Limited or generate 9.39% return on investment over 90 days.

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

Highway Holdings Limited  vs.  The Boeing

Highway Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical indicators, Highway Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Boeing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Boeing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Boeing is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Highway Holdings and Boeing

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

The idea behind Highway Holdings Limited and The Boeing 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.