Correlation Between Highway Holdings and Black Hills

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

Diversification Opportunities for Highway Holdings and Black Hills

-0.7

Correlation Coefficient

Highway Holdings  Black Hills

Excellent diversification

The 3 months correlation between Highway and Black is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills 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 Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of Highway Holdings i.e., Highway Holdings and Black Hills go up and down completely randomly.

Pair Corralation between Highway Holdings and Black Hills

Given the investment horizon of 90 days Highway Holdings Limited is expected to under-perform the Black Hills. In addition to that, Highway Holdings is 1.2 times more volatile than Black Hills. It trades about 0.0 of its total potential returns per unit of risk. Black Hills is currently generating about 0.05 per unit of volatility. If you would invest  5,773  in Black Hills on December 28, 2024 and sell it today you would earn a total of  189.00  from holding Black Hills or generate 3.27% return on investment over 90 days.

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

Highway Holdings Limited  vs.  Black Hills

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.

Black Hills

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Black Hills 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 Black Hills

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

The idea behind Highway Holdings Limited and Black Hills 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.