Correlation Between Highway Holdings and Griffon

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

Diversification Opportunities for Highway Holdings and Griffon

0.13

Correlation Coefficient

Highway Holdings  Griffon

Average diversification

The 3 months correlation between Highway and Griffon is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon 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 Griffon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffon has no effect on the direction of Highway Holdings i.e., Highway Holdings and Griffon go up and down completely randomly.

Pair Corralation between Highway Holdings and Griffon

Given the investment horizon of 90 days Highway Holdings is expected to generate 12.89 times less return on investment than Griffon. But when comparing it to its historical volatility, Highway Holdings Limited is 3.73 times less risky than Griffon. It trades about 0.09 of its potential returns per unit of risk. Griffon is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  6,339  in Griffon on September 4, 2024 and sell it today you would earn a total of  1,927  from holding Griffon or generate 30.4% return on investment over 90 days.

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

Highway Holdings Limited  vs.  Griffon

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 unfluctuating technical indicators, Highway Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Griffon

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Griffon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highway Holdings and Griffon

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

The idea behind Highway Holdings Limited and Griffon 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.

Check out your portfolio center.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.