Correlation Between Highway Holdings and Nature Wood

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

Diversification Opportunities for Highway Holdings and Nature Wood

0.08

Correlation Coefficient

Highway Holdings  Nature Wood

Significant diversification

The 3 months correlation between Highway and Nature is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Nature Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature Wood Group 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 Nature Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature Wood Group has no effect on the direction of Highway Holdings i.e., Highway Holdings and Nature Wood go up and down completely randomly.

Pair Corralation between Highway Holdings and Nature Wood

Given the investment horizon of 90 days Highway Holdings Limited is expected to generate 0.32 times more return on investment than Nature Wood. However, Highway Holdings Limited is 3.1 times less risky than Nature Wood. It trades about 0.15 of its potential returns per unit of risk. Nature Wood Group is currently generating about -0.03 per unit of risk. If you would invest  191.00  in Highway Holdings Limited on September 1, 2024 and sell it today you would earn a total of  7.00  from holding Highway Holdings Limited or generate 3.66% return on investment over 90 days.

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

Highway Holdings Limited  vs.  Nature Wood Group

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 conflicting technical indicators, Highway Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Nature Wood Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nature Wood Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Highway Holdings and Nature Wood

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

The idea behind Highway Holdings Limited and Nature Wood Group 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 CEOs Directory module to screen CEOs from public companies around the world.