Correlation Between Highway Holdings and Metalink

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

Diversification Opportunities for Highway Holdings and Metalink

0.35

Correlation Coefficient

Highway Holdings  Metalink

Weak diversification

The 3 months correlation between Highway and Metalink is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Metalink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalink 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 Metalink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalink has no effect on the direction of Highway Holdings i.e., Highway Holdings and Metalink go up and down completely randomly.

Pair Corralation between Highway Holdings and Metalink

Given the investment horizon of 90 days Highway Holdings Limited is expected to generate 4.44 times more return on investment than Metalink. However, Highway Holdings is 4.44 times more volatile than Metalink. It trades about 0.05 of its potential returns per unit of risk. Metalink is currently generating about 0.16 per unit of risk. If you would invest  180.00  in Highway Holdings Limited on September 12, 2024 and sell it today you would earn a total of  16.00  from holding Highway Holdings Limited or generate 8.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Highway Holdings Limited  vs.  Metalink

Highway Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 3 (%) 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.

Metalink

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metalink are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Metalink may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Highway Holdings and Metalink

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

The idea behind Highway Holdings Limited and Metalink 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..