Correlation Between Highlight Communications and Larsen Toubro
Can any of the company-specific risk be diversified away by investing in both Highlight Communications and Larsen Toubro 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 Highlight Communications and Larsen Toubro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and Larsen Toubro Limited, you can compare the effects of market volatilities on Highlight Communications and Larsen Toubro 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 Highlight Communications with a short position of Larsen Toubro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and Larsen Toubro.
Diversification Opportunities for Highlight Communications and Larsen Toubro
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Highlight and Larsen is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Larsen Toubro Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Larsen Toubro Limited and Highlight Communications 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 Highlight Communications AG are associated (or correlated) with Larsen Toubro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Larsen Toubro Limited has no effect on the direction of Highlight Communications i.e., Highlight Communications and Larsen Toubro go up and down completely randomly.
Pair Corralation between Highlight Communications and Larsen Toubro
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 1.13 times more return on investment than Larsen Toubro. However, Highlight Communications is 1.13 times more volatile than Larsen Toubro Limited. It trades about 0.33 of its potential returns per unit of risk. Larsen Toubro Limited is currently generating about 0.07 per unit of risk. If you would invest 99.00 in Highlight Communications AG on September 1, 2024 and sell it today you would earn a total of 22.00 from holding Highlight Communications AG or generate 22.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. Larsen Toubro Limited
Performance |
| Timeline |
| Highlight Communications |
| Larsen Toubro Limited |
Highlight Communications and Larsen Toubro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and Larsen Toubro
The main advantage of trading using opposite Highlight Communications and Larsen Toubro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications position performs unexpectedly, Larsen Toubro 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 Larsen Toubro will offset losses from the drop in Larsen Toubro's long position.| Highlight Communications vs. CNVISION MEDIA | Highlight Communications vs. PLAYTIKA HOLDING DL 01 | Highlight Communications vs. Seven West Media | Highlight Communications vs. Playa Hotels Resorts |
| Larsen Toubro vs. Highlight Communications AG | Larsen Toubro vs. BJs Restaurants | Larsen Toubro vs. Luckin Coffee | Larsen Toubro vs. GREENX METALS LTD |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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