Correlation Between Highway Holdings and American Lithium
Can any of the company-specific risk be diversified away by investing in both Highway Holdings and American Lithium 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 Lithium 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 Lithium Corp, you can compare the effects of market volatilities on Highway Holdings and American Lithium 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 Lithium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and American Lithium.
Diversification Opportunities for Highway Holdings and American Lithium
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Highway and American is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and American Lithium Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Lithium Corp 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 Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Lithium Corp has no effect on the direction of Highway Holdings i.e., Highway Holdings and American Lithium go up and down completely randomly.
Pair Corralation between Highway Holdings and American Lithium
Given the investment horizon of 90 days Highway Holdings is expected to generate 3.49 times less return on investment than American Lithium. But when comparing it to its historical volatility, Highway Holdings Limited is 2.42 times less risky than American Lithium. It trades about 0.03 of its potential returns per unit of risk. American Lithium Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 37.00 in American Lithium Corp on November 2, 2024 and sell it today you would earn a total of 1.00 from holding American Lithium Corp or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 81.55% |
| Values | Daily Returns |
Highway Holdings Limited vs. American Lithium Corp
Performance |
| Timeline |
| Highway Holdings |
| American Lithium Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Highway Holdings and American Lithium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highway Holdings and American Lithium
The main advantage of trading using opposite Highway Holdings and American Lithium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, American Lithium 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 Lithium will offset losses from the drop in American Lithium'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 |
| American Lithium vs. Procter Gamble | American Lithium vs. Lion One Metals | American Lithium vs. Discover Financial Services | American Lithium vs. SEI Investments |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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