Correlation Between Herald Investment and Caledonia Investments
Can any of the company-specific risk be diversified away by investing in both Herald Investment and Caledonia Investments 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 Caledonia Investments 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 Caledonia Investments, you can compare the effects of market volatilities on Herald Investment and Caledonia Investments 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 Caledonia Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herald Investment and Caledonia Investments.
Diversification Opportunities for Herald Investment and Caledonia Investments
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Herald and Caledonia is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Caledonia Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Investments 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 Caledonia Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Investments has no effect on the direction of Herald Investment i.e., Herald Investment and Caledonia Investments go up and down completely randomly.
Pair Corralation between Herald Investment and Caledonia Investments
Assuming the 90 days trading horizon Herald Investment Trust is expected to under-perform the Caledonia Investments. In addition to that, Herald Investment is 1.41 times more volatile than Caledonia Investments. It trades about -0.16 of its total potential returns per unit of risk. Caledonia Investments is currently generating about 0.15 per unit of volatility. If you would invest 354,000 in Caledonia Investments on October 24, 2024 and sell it today you would earn a total of 10,000 from holding Caledonia Investments or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Herald Investment Trust vs. Caledonia Investments
Performance |
| Timeline |
| Herald Investment Trust |
| Caledonia Investments |
Herald Investment and Caledonia Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herald Investment and Caledonia Investments
The main advantage of trading using opposite Herald Investment and Caledonia Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herald Investment position performs unexpectedly, Caledonia Investments 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 Caledonia Investments will offset losses from the drop in Caledonia Investments' long position.| Herald Investment vs. Catalyst Media Group | Herald Investment vs. CATLIN GROUP | Herald Investment vs. Tamburi Investment Partners | Herald Investment vs. Magnora ASA |
| Caledonia Investments vs. Samsung Electronics Co | Caledonia Investments vs. Samsung Electronics Co | Caledonia Investments vs. Toyota Motor Corp | Caledonia Investments vs. Reliance Industries Ltd |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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