Correlation Between Highway Holdings and Skyline

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

Diversification Opportunities for Highway Holdings and Skyline

-0.21

Correlation Coefficient

Highway Holdings  Skyline

Very good diversification

The 3 months correlation between Highway and Skyline is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Skyline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline 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 Skyline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline has no effect on the direction of Highway Holdings i.e., Highway Holdings and Skyline go up and down completely randomly.

Pair Corralation between Highway Holdings and Skyline

Given the investment horizon of 90 days Highway Holdings is expected to generate 3.77 times less return on investment than Skyline. In addition to that, Highway Holdings is 1.09 times more volatile than Skyline. It trades about 0.01 of its total potential returns per unit of risk. Skyline is currently generating about 0.05 per unit of volatility. If you would invest  5,506  in Skyline on October 10, 2024 and sell it today you would earn a total of  3,066  from holding Skyline or generate 55.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Highway Holdings Limited  vs.  Skyline

Highway Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 3 (%) 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.

Skyline

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Highway Holdings and Skyline

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

The idea behind Highway Holdings Limited and Skyline 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.