Correlation Between BBB Foods and Highway Holdings
Can any of the company-specific risk be diversified away by investing in both BBB Foods 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 BBB Foods and Highway Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and Highway Holdings Limited, you can compare the effects of market volatilities on BBB Foods 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 BBB Foods with a short position of Highway Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and Highway Holdings.
Diversification Opportunities for BBB Foods and Highway Holdings
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BBB and Highway is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings and BBB Foods 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 BBB Foods 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 BBB Foods i.e., BBB Foods and Highway Holdings go up and down completely randomly.
Pair Corralation between BBB Foods and Highway Holdings
Given the investment horizon of 90 days BBB Foods is expected to generate 1.08 times more return on investment than Highway Holdings. However, BBB Foods is 1.08 times more volatile than Highway Holdings Limited. It trades about 0.09 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.01 per unit of risk. If you would invest 1,750 in BBB Foods on September 3, 2024 and sell it today you would earn a total of 1,072 from holding BBB Foods or generate 61.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 41.78% |
| Values | Daily Returns |
BBB Foods vs. Highway Holdings Limited
Performance |
| Timeline |
| BBB Foods |
| Highway Holdings |
BBB Foods and Highway Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBB Foods and Highway Holdings
The main advantage of trading using opposite BBB Foods and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods 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.| BBB Foods vs. NetSol Technologies | BBB Foods vs. Analog Devices | BBB Foods vs. FARO Technologies | BBB Foods vs. Getty Images Holdings |
| Highway Holdings vs. Deswell Industries | Highway Holdings vs. SCOR PK | Highway Holdings vs. HUMANA INC | Highway Holdings vs. Aquagold International |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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