Correlation Between Highway Holdings and JOHNSON

Can any of the company-specific risk be diversified away by investing in both Highway Holdings and JOHNSON 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 JOHNSON 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 JOHNSON JOHNSON 585, you can compare the effects of market volatilities on Highway Holdings and JOHNSON 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 JOHNSON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and JOHNSON.

Diversification Opportunities for Highway Holdings and JOHNSON

-0.38

Correlation Coefficient

Highway Holdings  JOHNSON

Very good diversification

The 3 months correlation between Highway and JOHNSON is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and JOHNSON JOHNSON 585 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JOHNSON JOHNSON 585 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 JOHNSON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JOHNSON JOHNSON 585 has no effect on the direction of Highway Holdings i.e., Highway Holdings and JOHNSON go up and down completely randomly.

Pair Corralation between Highway Holdings and JOHNSON

Given the investment horizon of 90 days Highway Holdings Limited is expected to generate 1.06 times more return on investment than JOHNSON. However, Highway Holdings is 1.06 times more volatile than JOHNSON JOHNSON 585. It trades about 0.03 of its potential returns per unit of risk. JOHNSON JOHNSON 585 is currently generating about 0.03 per unit of risk. If you would invest  185.00  in Highway Holdings Limited on October 25, 2024 and sell it today you would earn a total of  4.00  from holding Highway Holdings Limited or generate 2.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Highway Holdings Limited  vs.  JOHNSON JOHNSON 585

Highway Holdings

Risk-Adjusted Performance

2 of 100

Very 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 healthy technical indicators, Highway Holdings is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

JOHNSON JOHNSON 585

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JOHNSON JOHNSON 585 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, JOHNSON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Highway Holdings and JOHNSON

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

The idea behind Highway Holdings Limited and JOHNSON JOHNSON 585 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.