Correlation Between Highway Holdings and Timken
Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Timken 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 Timken 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 Timken Company, you can compare the effects of market volatilities on Highway Holdings and Timken 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 Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Timken.
Diversification Opportunities for Highway Holdings and Timken
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Highway and Timken is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Highway Holdings i.e., Highway Holdings and Timken go up and down completely randomly.
Pair Corralation between Highway Holdings and Timken
Given the investment horizon of 90 days Highway Holdings Limited is expected to under-perform the Timken. But the stock apears to be less risky and, when comparing its historical volatility, Highway Holdings Limited is 1.13 times less risky than Timken. The stock trades about 0.0 of its potential returns per unit of risk. The Timken Company is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,058 in Timken Company on December 28, 2024 and sell it today you would earn a total of 321.00 from holding Timken Company or generate 4.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Highway Holdings Limited vs. Timken Company
Performance |
Timeline |
Highway Holdings |
Timken Company |
Highway Holdings and Timken Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Highway Holdings and Timken
The main advantage of trading using opposite Highway Holdings and Timken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, Timken 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 Timken will offset losses from the drop in Timken's long position.Highway Holdings vs. Deswell Industries | Highway Holdings vs. Euro Tech Holdings | Highway Holdings vs. China Natural Resources | Highway Holdings vs. Arts Way Manufacturing Co |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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