Correlation Between Pure Cycle and Highway Holdings

Can any of the company-specific risk be diversified away by investing in both Pure Cycle 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 Pure Cycle and Highway Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pure Cycle and Highway Holdings Limited, you can compare the effects of market volatilities on Pure Cycle 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 Pure Cycle with a short position of Highway Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Cycle and Highway Holdings.

Diversification Opportunities for Pure Cycle and Highway Holdings

0.03

Correlation Coefficient

Pure Cycle  Highway Holdings

Significant diversification

The 3 months correlation between Pure and Highway is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Pure Cycle and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings and Pure Cycle 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 Pure Cycle 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 Pure Cycle i.e., Pure Cycle and Highway Holdings go up and down completely randomly.

Pair Corralation between Pure Cycle and Highway Holdings

Given the investment horizon of 90 days Pure Cycle is expected to under-perform the Highway Holdings. In addition to that, Pure Cycle is 2.24 times more volatile than Highway Holdings Limited. It trades about -0.21 of its total potential returns per unit of risk. Highway Holdings Limited is currently generating about -0.06 per unit of volatility. If you would invest  193.00  in Highway Holdings Limited on September 24, 2024 and sell it today you would lose (3.00) from holding Highway Holdings Limited or give up 1.55% of portfolio value over 90 days.

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

Pure Cycle  vs.  Highway Holdings Limited

Pure Cycle

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Cycle are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Pure Cycle displayed solid returns over the last few months and may actually be approaching a breakup point.

Highway Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 2 (%) 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.

Pair Trading with Pure Cycle and Highway Holdings

The main advantage of trading using opposite Pure Cycle and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pure Cycle 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.

The idea behind Pure Cycle and Highway Holdings Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.