Correlation Between Euro Tech and Highway Holdings

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

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

Diversification Opportunities for Euro Tech and Highway Holdings

-0.26

Correlation Coefficient

Euro Tech  Highway Holdings

Very good diversification

The 3 months correlation between Euro and Highway is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Euro Tech Holdings and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings and Euro Tech 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 Euro Tech Holdings 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 Euro Tech i.e., Euro Tech and Highway Holdings go up and down completely randomly.

Pair Corralation between Euro Tech and Highway Holdings

Given the investment horizon of 90 days Euro Tech Holdings is expected to under-perform the Highway Holdings. In addition to that, Euro Tech is 2.29 times more volatile than Highway Holdings Limited. It trades about -0.16 of its total potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.03 per unit of volatility. If you would invest  190.00  in Highway Holdings Limited on August 31, 2024 and sell it today you would earn a total of  1.00  from holding Highway Holdings Limited or generate 0.53% return on investment over 90 days.

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

Euro Tech Holdings  vs.  Highway Holdings Limited

Euro Tech Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Euro Tech Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Euro Tech is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 conflicting technical indicators, Highway Holdings may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Euro Tech and Highway Holdings

The main advantage of trading using opposite Euro Tech and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euro Tech 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 Euro Tech Holdings 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.