Correlation Between Highway Holdings and Stardust Power

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

Diversification Opportunities for Highway Holdings and Stardust Power

-0.28

Correlation Coefficient

Highway Holdings  Stardust Power

Very good diversification

The 3 months correlation between Highway and Stardust is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Stardust Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stardust Power 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 Stardust Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stardust Power has no effect on the direction of Highway Holdings i.e., Highway Holdings and Stardust Power go up and down completely randomly.

Pair Corralation between Highway Holdings and Stardust Power

Given the investment horizon of 90 days Highway Holdings is expected to generate 43.81 times less return on investment than Stardust Power. But when comparing it to its historical volatility, Highway Holdings Limited is 5.2 times less risky than Stardust Power. It trades about 0.01 of its potential returns per unit of risk. Stardust Power is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  21.00  in Stardust Power on September 2, 2024 and sell it today you would earn a total of  1.00  from holding Stardust Power or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	18.22%
Values	Daily Returns

Highway Holdings Limited  vs.  Stardust Power

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.

Stardust Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stardust Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Stardust Power is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Highway Holdings and Stardust Power

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

The idea behind Highway Holdings Limited and Stardust Power 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.