Correlation Between Highway Holdings and Cementos Pacasmayo

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

Diversification Opportunities for Highway Holdings and Cementos Pacasmayo

-0.72

Correlation Coefficient

Highway Holdings  Cementos Pacasmayo

Pay attention - limited upside

The 3 months correlation between Highway and Cementos is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and Cementos Pacasmayo SAA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cementos Pacasmayo SAA 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 Cementos Pacasmayo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cementos Pacasmayo SAA has no effect on the direction of Highway Holdings i.e., Highway Holdings and Cementos Pacasmayo go up and down completely randomly.

Pair Corralation between Highway Holdings and Cementos Pacasmayo

Given the investment horizon of 90 days Highway Holdings Limited is expected to generate 0.98 times more return on investment than Cementos Pacasmayo. However, Highway Holdings Limited is 1.02 times less risky than Cementos Pacasmayo. It trades about 0.05 of its potential returns per unit of risk. Cementos Pacasmayo SAA is currently generating about -0.14 per unit of risk. If you would invest  205.00  in Highway Holdings Limited on March 14, 2024 and sell it today you would earn a total of  9.00  from holding Highway Holdings Limited or generate 4.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Highway Holdings Limited  vs.  Cementos Pacasmayo SAA

Highway Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical indicators, Highway Holdings is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Cementos Pacasmayo SAA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cementos Pacasmayo SAA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Highway Holdings and Cementos Pacasmayo

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

The idea behind Highway Holdings Limited and Cementos Pacasmayo SAA 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .