Correlation Between Highway Holdings and Analog Devices

Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Analog Devices 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 Analog Devices 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 Analog Devices, you can compare the effects of market volatilities on Highway Holdings and Analog Devices 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 Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Analog Devices.

Diversification Opportunities for Highway Holdings and Analog Devices

-0.11

Correlation Coefficient

Highway Holdings  Analog Devices

Good diversification

The 3 months correlation between Highway and Analog is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Highway Holdings i.e., Highway Holdings and Analog Devices go up and down completely randomly.

Pair Corralation between Highway Holdings and Analog Devices

Given the investment horizon of 90 days Highway Holdings is expected to generate 1.89 times less return on investment than Analog Devices. In addition to that, Highway Holdings is 1.33 times more volatile than Analog Devices. It trades about 0.02 of its total potential returns per unit of risk. Analog Devices is currently generating about 0.04 per unit of volatility. If you would invest  18,770  in Analog Devices on September 4, 2024 and sell it today you would earn a total of  3,384  from holding Analog Devices or generate 18.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Highway Holdings Limited  vs.  Analog Devices

Highway Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Highway Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Analog Devices

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Highway Holdings and Analog Devices

The main advantage of trading using opposite Highway Holdings and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.

The idea behind Highway Holdings Limited and Analog Devices 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.

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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 Stocks Directory module to find actively traded stocks across global markets.