Correlation Between Highway Holdings and Northwest Pipe
Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Northwest Pipe 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 Northwest Pipe 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 Northwest Pipe, you can compare the effects of market volatilities on Highway Holdings and Northwest Pipe 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 Northwest Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Northwest Pipe.
Diversification Opportunities for Highway Holdings and Northwest Pipe
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Highway and Northwest is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Northwest Pipe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Pipe 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 Northwest Pipe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Pipe has no effect on the direction of Highway Holdings i.e., Highway Holdings and Northwest Pipe go up and down completely randomly.
Pair Corralation between Highway Holdings and Northwest Pipe
Given the investment horizon of 90 days Highway Holdings is expected to generate 3.71 times less return on investment than Northwest Pipe. But when comparing it to its historical volatility, Highway Holdings Limited is 2.3 times less risky than Northwest Pipe. It trades about 0.17 of its potential returns per unit of risk. Northwest Pipe is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 4,822 in Northwest Pipe on September 2, 2024 and sell it today you would earn a total of 785.00 from holding Northwest Pipe or generate 16.28% 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. Northwest Pipe
Performance |
| Timeline |
| Highway Holdings |
| Northwest Pipe |
Highway Holdings and Northwest Pipe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highway Holdings and Northwest Pipe
The main advantage of trading using opposite Highway Holdings and Northwest Pipe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, Northwest Pipe 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 Northwest Pipe will offset losses from the drop in Northwest Pipe'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 |
| Northwest Pipe vs. Insteel Industries | Northwest Pipe vs. Carpenter Technology | Northwest Pipe vs. ESAB Corp | Northwest Pipe vs. Gulf Island Fabrication |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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