Correlation Between Highway Holdings and Invesco SP

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Can any of the company-specific risk be diversified away by investing in both Highway Holdings and Invesco SP 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 Invesco SP 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 Invesco SP 500, you can compare the effects of market volatilities on Highway Holdings and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highway Holdings and Invesco SP.

Diversification Opportunities for Highway Holdings and Invesco SP

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Highway and Invesco is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP 500 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of Highway Holdings i.e., Highway Holdings and Invesco SP go up and down completely randomly.

Pair Corralation between Highway Holdings and Invesco SP

Given the investment horizon of 90 days Highway Holdings Limited is expected to generate 2.6 times more return on investment than Invesco SP. However, Highway Holdings is 2.6 times more volatile than Invesco SP 500. It trades about 0.21 of its potential returns per unit of risk. Invesco SP 500 is currently generating about 0.26 per unit of risk. If you would invest  204.00  in Highway Holdings Limited on September 3, 2022 and sell it today you would earn a total of  36.00  from holding Highway Holdings Limited or generate 17.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Highway Holdings Limited  vs.  Invesco SP 500

 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

Invesco SP 500 
Invesco Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish basic indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Invesco Price Channel

Highway Holdings and Invesco SP Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Highway Holdings and Invesco SP

The main advantage of trading using opposite Highway Holdings and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP's long position.
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The idea behind Highway Holdings Limited and Invesco SP 500 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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