Correlation Between Highway Holdings and Western

Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Western 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 Western 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 Western Digital 475, you can compare the effects of market volatilities on Highway Holdings and Western 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 Western. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Western.

Diversification Opportunities for Highway Holdings and Western

-0.02

Correlation Coefficient

Highway Holdings  Western

Good diversification

The 3 months correlation between Highway and Western is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Western Digital 475 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 475 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 Western. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital 475 has no effect on the direction of Highway Holdings i.e., Highway Holdings and Western go up and down completely randomly.

Pair Corralation between Highway Holdings and Western

Given the investment horizon of 90 days Highway Holdings Limited is expected to generate 2.55 times more return on investment than Western. However, Highway Holdings is 2.55 times more volatile than Western Digital 475. It trades about 0.01 of its potential returns per unit of risk. Western Digital 475 is currently generating about 0.0 per unit of risk. If you would invest  211.00  in Highway Holdings Limited on October 23, 2024 and sell it today you would lose (19.00) from holding Highway Holdings Limited or give up 9.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.39%
Values	Daily Returns

Highway Holdings Limited  vs.  Western Digital 475

Highway Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highway Holdings Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Western Digital 475

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital 475 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Western 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 Western

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

The idea behind Highway Holdings Limited and Western Digital 475 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.