Correlation Between Highway Holdings and Smith Douglas
Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Smith Douglas 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 Smith Douglas 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 Smith Douglas Homes, you can compare the effects of market volatilities on Highway Holdings and Smith Douglas 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 Smith Douglas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Smith Douglas.
Diversification Opportunities for Highway Holdings and Smith Douglas
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Highway and Smith is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Smith Douglas Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith Douglas Homes 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 Smith Douglas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith Douglas Homes has no effect on the direction of Highway Holdings i.e., Highway Holdings and Smith Douglas go up and down completely randomly.
Pair Corralation between Highway Holdings and Smith Douglas
Given the investment horizon of 90 days Highway Holdings Limited is expected to generate 0.23 times more return on investment than Smith Douglas. However, Highway Holdings Limited is 4.27 times less risky than Smith Douglas. It trades about 0.03 of its potential returns per unit of risk. Smith Douglas Homes is currently generating about -0.01 per unit of risk. If you would invest 190.00 in Highway Holdings Limited on August 31, 2024 and sell it today you would earn a total of 1.00 from holding Highway Holdings Limited or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highway Holdings Limited vs. Smith Douglas Homes
Performance |
| Timeline |
| Highway Holdings |
| Smith Douglas Homes |
Highway Holdings and Smith Douglas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highway Holdings and Smith Douglas
The main advantage of trading using opposite Highway Holdings and Smith Douglas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, Smith Douglas 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 Smith Douglas will offset losses from the drop in Smith Douglas' 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 |
| Smith Douglas vs. EMCOR Group | Smith Douglas vs. CenterPoint Energy | Smith Douglas vs. Highway Holdings Limited | Smith Douglas vs. United Utilities Group |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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