Correlation Between Highway Holdings and HOSPITALITY

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

Diversification Opportunities for Highway Holdings and HOSPITALITY

0.29

Correlation Coefficient

Highway Holdings  HOSPITALITY

Modest diversification

The 3 months correlation between Highway and HOSPITALITY is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and HOSPITALITY PPTYS TR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOSPITALITY PPTYS 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 HOSPITALITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOSPITALITY PPTYS has no effect on the direction of Highway Holdings i.e., Highway Holdings and HOSPITALITY go up and down completely randomly.

Pair Corralation between Highway Holdings and HOSPITALITY

Given the investment horizon of 90 days Highway Holdings is expected to generate 1.01 times less return on investment than HOSPITALITY. In addition to that, Highway Holdings is 3.98 times more volatile than HOSPITALITY PPTYS TR. It trades about 0.01 of its total potential returns per unit of risk. HOSPITALITY PPTYS TR is currently generating about 0.04 per unit of volatility. If you would invest  8,520  in HOSPITALITY PPTYS TR on September 5, 2024 and sell it today you would earn a total of  1,178  from holding HOSPITALITY PPTYS TR or generate 13.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.58%
Values	Daily Returns

Highway Holdings Limited  vs.  HOSPITALITY PPTYS TR

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 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HOSPITALITY PPTYS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HOSPITALITY PPTYS TR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HOSPITALITY is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Highway Holdings and HOSPITALITY

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

The idea behind Highway Holdings Limited and HOSPITALITY PPTYS TR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.