Correlation Between Sea and Highway Holdings
Can any of the company-specific risk be diversified away by investing in both Sea 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 Sea and Highway Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and Highway Holdings Limited, you can compare the effects of market volatilities on Sea 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 Sea with a short position of Highway Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and Highway Holdings.
Diversification Opportunities for Sea and Highway Holdings
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sea and Highway is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sea and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings and Sea 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 Sea 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 Sea i.e., Sea and Highway Holdings go up and down completely randomly.
Pair Corralation between Sea and Highway Holdings
Allowing for the 90-day total investment horizon Sea is expected to generate 2.52 times more return on investment than Highway Holdings. However, Sea is 2.52 times more volatile than Highway Holdings Limited. It trades about 0.23 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 9,746 in Sea on September 12, 2024 and sell it today you would earn a total of 1,459 from holding Sea or generate 14.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sea vs. Highway Holdings Limited
Performance |
| Timeline |
| Sea |
| Highway Holdings |
Sea and Highway Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and Highway Holdings
The main advantage of trading using opposite Sea and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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 Sea 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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