Correlation Between Highway Holdings and Raytheon Technologies
Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Raytheon Technologies 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 Raytheon Technologies 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 Raytheon Technologies Corp, you can compare the effects of market volatilities on Highway Holdings and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Raytheon Technologies.
Diversification Opportunities for Highway Holdings and Raytheon Technologies
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Highway and Raytheon is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Raytheon Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Highway Holdings i.e., Highway Holdings and Raytheon Technologies go up and down completely randomly.
Pair Corralation between Highway Holdings and Raytheon Technologies
Given the investment horizon of 90 days Highway Holdings is expected to generate 1.05 times less return on investment than Raytheon Technologies. But when comparing it to its historical volatility, Highway Holdings Limited is 1.24 times less risky than Raytheon Technologies. It trades about 0.16 of its potential returns per unit of risk. Raytheon Technologies Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 11,737 in Raytheon Technologies Corp on September 3, 2024 and sell it today you would earn a total of 446.00 from holding Raytheon Technologies Corp or generate 3.8% 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. Raytheon Technologies Corp
Performance |
| Timeline |
| Highway Holdings |
| Raytheon Technologies |
Highway Holdings and Raytheon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highway Holdings and Raytheon Technologies
The main advantage of trading using opposite Highway Holdings and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.| Highway Holdings vs. Deswell Industries | Highway Holdings vs. SCOR PK | Highway Holdings vs. HUMANA INC | Highway Holdings vs. Aquagold International |
| Raytheon Technologies vs. Highway Holdings Limited | Raytheon Technologies vs. QCR Holdings | Raytheon Technologies vs. Partner Communications | Raytheon Technologies vs. Acumen Pharmaceuticals |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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