Correlation Between Highway Holdings and AMERICAN

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

Diversification Opportunities for Highway Holdings and AMERICAN

-0.09

Correlation Coefficient

Highway Holdings  AMERICAN

Good diversification

The 3 months correlation between Highway and AMERICAN is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and AMERICAN FINL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN FINL GROUP 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN FINL GROUP has no effect on the direction of Highway Holdings i.e., Highway Holdings and AMERICAN go up and down completely randomly.

Pair Corralation between Highway Holdings and AMERICAN

Given the investment horizon of 90 days Highway Holdings is expected to generate 1.54 times less return on investment than AMERICAN. But when comparing it to its historical volatility, Highway Holdings Limited is 1.81 times less risky than AMERICAN. It trades about 0.14 of its potential returns per unit of risk. AMERICAN FINL GROUP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  8,551  in AMERICAN FINL GROUP on October 12, 2024 and sell it today you would earn a total of  448.00  from holding AMERICAN FINL GROUP or generate 5.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Highway Holdings Limited  vs.  AMERICAN FINL GROUP

Highway Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Highway Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

AMERICAN FINL GROUP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AMERICAN FINL GROUP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, AMERICAN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Highway Holdings and AMERICAN

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

The idea behind Highway Holdings Limited and AMERICAN FINL GROUP 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.