Correlation Between Highway Holdings and Western Digital
Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Western Digital 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 Western Digital 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 Western Digital, you can compare the effects of market volatilities on Highway Holdings and Western Digital 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 Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Western Digital.
Diversification Opportunities for Highway Holdings and Western Digital
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Highway and Western is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Highway Holdings i.e., Highway Holdings and Western Digital go up and down completely randomly.
Pair Corralation between Highway Holdings and Western Digital
Given the investment horizon of 90 days Highway Holdings Limited is expected to under-perform the Western Digital. But the stock apears to be less risky and, when comparing its historical volatility, Highway Holdings Limited is 2.99 times less risky than Western Digital. The stock trades about -0.06 of its potential returns per unit of risk. The Western Digital is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,868 in Western Digital on November 28, 2024 and sell it today you would earn a total of 148.00 from holding Western Digital or generate 3.04% 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. Western Digital
Performance |
| Timeline |
| Highway Holdings |
| Western Digital |
Highway Holdings and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highway Holdings and Western Digital
The main advantage of trading using opposite Highway Holdings and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital'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 |
| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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