Correlation Between Highway Holdings and Optimism

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

Diversification Opportunities for Highway Holdings and Optimism

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between Highway and Optimism is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Optimism in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimism 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 Optimism. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimism has no effect on the direction of Highway Holdings i.e., Highway Holdings and Optimism go up and down completely randomly.

Pair Corralation between Highway Holdings and Optimism

Given the investment horizon of 90 days Highway Holdings Limited is expected to under-perform the Optimism. But the stock apears to be less risky and, when comparing its historical volatility, Highway Holdings Limited is 18.15 times less risky than Optimism. The stock trades about -0.03 of its potential returns per unit of risk. The Optimism is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Optimism on September 4, 2022 and sell it today you would earn a total of  104.00  from holding Optimism or generate 9.223372036854776E16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy96.51%
ValuesDaily Returns

Highway Holdings Limited  vs.  Optimism

 Performance (%) 
       Timeline  
Highway Holdings 
Highway Performance
4 of 100
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. Despite quite weak technical indicators, Highway Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Highway Price Channel

Optimism 
Optimism Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Optimism are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Optimism sustained solid returns over the last few months and may actually be approaching a breakup point.

Optimism Price Channel

Highway Holdings and Optimism Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Highway Holdings and Optimism

The main advantage of trading using opposite Highway Holdings and Optimism positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, Optimism 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 Optimism will offset losses from the drop in Optimism's long position.
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The idea behind Highway Holdings Limited and Optimism 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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Check out your portfolio center. 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 Stock Screener module to find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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