Correlation Between Herald Investment and Axfood AB
Can any of the company-specific risk be diversified away by investing in both Herald Investment and Axfood AB 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 Herald Investment and Axfood AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Herald Investment Trust and Axfood AB, you can compare the effects of market volatilities on Herald Investment and Axfood AB 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 Herald Investment with a short position of Axfood AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herald Investment and Axfood AB.
Diversification Opportunities for Herald Investment and Axfood AB
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Herald and Axfood is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB and Herald Investment 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 Herald Investment Trust are associated (or correlated) with Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of Herald Investment i.e., Herald Investment and Axfood AB go up and down completely randomly.
Pair Corralation between Herald Investment and Axfood AB
Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 1.44 times more return on investment than Axfood AB. However, Herald Investment is 1.44 times more volatile than Axfood AB. It trades about -0.01 of its potential returns per unit of risk. Axfood AB is currently generating about -0.08 per unit of risk. If you would invest 250,000 in Herald Investment Trust on October 16, 2024 and sell it today you would lose (1,000.00) from holding Herald Investment Trust or give up 0.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Herald Investment Trust vs. Axfood AB
Performance |
| Timeline |
| Herald Investment Trust |
| Axfood AB |
Herald Investment and Axfood AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herald Investment and Axfood AB
The main advantage of trading using opposite Herald Investment and Axfood AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herald Investment position performs unexpectedly, Axfood AB 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 Axfood AB will offset losses from the drop in Axfood AB's long position.| Herald Investment vs. Deltex Medical Group | Herald Investment vs. Software Circle plc | Herald Investment vs. SoftBank Group Corp | Herald Investment vs. Synchrony Financial |
| Axfood AB vs. Wizz Air Holdings | Axfood AB vs. British American Tobacco | Axfood AB vs. Air Products Chemicals | Axfood AB vs. United Airlines Holdings |
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 the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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