Correlation Between Build A and Highway Holdings

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

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

Diversification Opportunities for Build A and Highway Holdings

0.57

Correlation Coefficient

Build A  Highway Holdings

Very weak diversification

The 3 months correlation between Build and Highway is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Build A Bear Workshop and Highway Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway Holdings and Build A 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 Build A Bear Workshop 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 Build A i.e., Build A and Highway Holdings go up and down completely randomly.

Pair Corralation between Build A and Highway Holdings

Considering the 90-day investment horizon Build A Bear Workshop is expected to generate 1.63 times more return on investment than Highway Holdings. However, Build A is 1.63 times more volatile than Highway Holdings Limited. It trades about 0.2 of its potential returns per unit of risk. Highway Holdings Limited is currently generating about 0.04 per unit of risk. If you would invest  2,378  in Build A Bear Workshop on January 30, 2024 and sell it today you would earn a total of  601.00  from holding Build A Bear Workshop or generate 25.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

Build A Bear Workshop  vs.  Highway Holdings Limited

Build A Bear

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Build A Bear Workshop are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Build A showed solid returns over the last few months and may actually be approaching a breakup point.

Highway Holdings

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Highway Holdings Limited are ranked lower than 5 (%) 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 May 2024.

Pair Trading with Build A and Highway Holdings

The main advantage of trading using opposite Build A and Highway Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Build A 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 Build A Bear Workshop 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.