Correlation Between Highway Holdings and Reservoir Media

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

Diversification Opportunities for Highway Holdings and Reservoir Media

0.19

Correlation Coefficient

Highway Holdings  Reservoir Media

Average diversification

The 3 months correlation between Highway and Reservoir is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of Highway Holdings i.e., Highway Holdings and Reservoir Media go up and down completely randomly.

Pair Corralation between Highway Holdings and Reservoir Media

Given the investment horizon of 90 days Highway Holdings is expected to generate 3.29 times less return on investment than Reservoir Media. In addition to that, Highway Holdings is 1.76 times more volatile than Reservoir Media. It trades about 0.03 of its total potential returns per unit of risk. Reservoir Media is currently generating about 0.15 per unit of volatility. If you would invest  747.00  in Reservoir Media on September 23, 2024 and sell it today you would earn a total of  179.00  from holding Reservoir Media or generate 23.96% 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.  Reservoir Media

Highway Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Highway Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Reservoir Media

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Reservoir Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Highway Holdings and Reservoir Media

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

The idea behind Highway Holdings Limited and Reservoir Media 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.