Correlation Between Herald Investment and FC Investment
Can any of the company-specific risk be diversified away by investing in both Herald Investment and FC Investment 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 FC Investment 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 FC Investment Trust, you can compare the effects of market volatilities on Herald Investment and FC Investment 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 FC Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herald Investment and FC Investment.
Diversification Opportunities for Herald Investment and FC Investment
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Herald and FCIT is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and FC Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FC Investment Trust 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 FC Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FC Investment Trust has no effect on the direction of Herald Investment i.e., Herald Investment and FC Investment go up and down completely randomly.
Pair Corralation between Herald Investment and FC Investment
Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 1.3 times more return on investment than FC Investment. However, Herald Investment is 1.3 times more volatile than FC Investment Trust. It trades about 0.11 of its potential returns per unit of risk. FC Investment Trust is currently generating about 0.12 per unit of risk. If you would invest 167,800 in Herald Investment Trust on August 29, 2024 and sell it today you would earn a total of 65,700 from holding Herald Investment Trust or generate 39.15% 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. FC Investment Trust
Performance |
| Timeline |
| Herald Investment Trust |
| FC Investment Trust |
Herald Investment and FC Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herald Investment and FC Investment
The main advantage of trading using opposite Herald Investment and FC Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herald Investment position performs unexpectedly, FC Investment 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 FC Investment will offset losses from the drop in FC Investment's long position.| Herald Investment vs. Toyota Motor Corp | Herald Investment vs. Lendinvest PLC | Herald Investment vs. Neometals | Herald Investment vs. Coor Service Management |
| FC Investment vs. Toyota Motor Corp | FC Investment vs. Lendinvest PLC | FC Investment vs. Neometals | FC Investment vs. Coor Service Management |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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