Correlation Between Highway Holdings and Stepan
Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Stepan 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 Stepan 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 Stepan Company, you can compare the effects of market volatilities on Highway Holdings and Stepan 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 Stepan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Stepan.
Diversification Opportunities for Highway Holdings and Stepan
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Highway and Stepan is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Stepan Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stepan Company 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 Stepan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stepan Company has no effect on the direction of Highway Holdings i.e., Highway Holdings and Stepan go up and down completely randomly.
Pair Corralation between Highway Holdings and Stepan
Given the investment horizon of 90 days Highway Holdings Limited is expected to generate 1.8 times more return on investment than Stepan. However, Highway Holdings is 1.8 times more volatile than Stepan Company. It trades about 0.0 of its potential returns per unit of risk. Stepan Company is currently generating about -0.03 per unit of risk. If you would invest 210.00 in Highway Holdings Limited on September 1, 2024 and sell it today you would lose (12.00) from holding Highway Holdings Limited or give up 5.71% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highway Holdings Limited vs. Stepan Company
Performance |
| Timeline |
| Highway Holdings |
| Stepan Company |
Highway Holdings and Stepan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highway Holdings and Stepan
The main advantage of trading using opposite Highway Holdings and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan'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 |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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