Correlation Between MYR and Highway Holdings
Can any of the company-specific risk be diversified away by investing in both MYR and Highway Holdings 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 MYR and Highway Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MYR Group and Highway Holdings Limited, you can compare the effects of market volatilities on MYR and Highway Holdings 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 MYR with a short position of Highway Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of MYR and Highway Holdings.
Diversification Opportunities for MYR and Highway Holdings
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between MYR and Highway is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding MYR Group and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings and MYR 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 MYR Group are associated (or correlated) with Highway Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway Holdings has no effect on the direction of MYR i.e., MYR and Highway Holdings go up and down completely randomly.
Pair Corralation between MYR and Highway Holdings
Given the investment horizon of 90 days MYR Group is expected to generate 4.62 times more return on investment than Highway Holdings. However, MYR is 4.62 times more volatile than Highway Holdings Limited. It trades about 0.39 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.03 per unit of risk. If you would invest 11,533 in MYR Group on August 31, 2024 and sell it today you would earn a total of 4,244 from holding MYR Group or generate 36.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MYR Group vs. Highway Holdings Limited
Performance |
| Timeline |
| MYR Group |
| Highway Holdings |
MYR and Highway Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MYR and Highway Holdings
The main advantage of trading using opposite MYR and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MYR position performs unexpectedly, Highway Holdings 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 Highway Holdings will offset losses from the drop in Highway Holdings' long position.The idea behind MYR Group and Highway Holdings Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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