Correlation Between Highway Holdings and Baozun
Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Baozun 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 Baozun 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 Baozun Inc, you can compare the effects of market volatilities on Highway Holdings and Baozun 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 Baozun. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Baozun.
Diversification Opportunities for Highway Holdings and Baozun
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Highway and Baozun is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Baozun Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baozun Inc 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 Baozun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baozun Inc has no effect on the direction of Highway Holdings i.e., Highway Holdings and Baozun go up and down completely randomly.
Pair Corralation between Highway Holdings and Baozun
Given the investment horizon of 90 days Highway Holdings is expected to generate 1.46 times less return on investment than Baozun. But when comparing it to its historical volatility, Highway Holdings Limited is 1.12 times less risky than Baozun. It trades about 0.05 of its potential returns per unit of risk. Baozun Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 227.00 in Baozun Inc on September 4, 2024 and sell it today you would earn a total of 36.00 from holding Baozun Inc or generate 15.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highway Holdings Limited vs. Baozun Inc
Performance |
| Timeline |
| Highway Holdings |
| Baozun Inc |
Highway Holdings and Baozun Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highway Holdings and Baozun
The main advantage of trading using opposite Highway Holdings and Baozun positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, Baozun 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 Baozun will offset losses from the drop in Baozun'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 |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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