Correlation Between Highway Holdings and Boston Beer

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

Diversification Opportunities for Highway Holdings and Boston Beer

0.4

Correlation Coefficient

Highway Holdings  Boston Beer

Very weak diversification

The 3 months correlation between Highway and Boston is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer 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 Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of Highway Holdings i.e., Highway Holdings and Boston Beer go up and down completely randomly.

Pair Corralation between Highway Holdings and Boston Beer

Given the investment horizon of 90 days Highway Holdings Limited is expected to generate 1.92 times more return on investment than Boston Beer. However, Highway Holdings is 1.92 times more volatile than Boston Beer. It trades about 0.02 of its potential returns per unit of risk. Boston Beer is currently generating about -0.08 per unit of risk. 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	Weak
Accuracy	100.0%
Values	Daily Returns

Highway Holdings Limited  vs.  Boston Beer

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.

Boston Beer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Highway Holdings and Boston Beer

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

The idea behind Highway Holdings Limited and Boston Beer 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.