Correlation Between Herald Investment and Fidelity China
Can any of the company-specific risk be diversified away by investing in both Herald Investment and Fidelity China 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 Fidelity China 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 Fidelity China Special, you can compare the effects of market volatilities on Herald Investment and Fidelity China 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 Fidelity China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herald Investment and Fidelity China.
Diversification Opportunities for Herald Investment and Fidelity China
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Herald and Fidelity is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Fidelity China Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity China Special 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 Fidelity China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity China Special has no effect on the direction of Herald Investment i.e., Herald Investment and Fidelity China go up and down completely randomly.
Pair Corralation between Herald Investment and Fidelity China
Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 0.65 times more return on investment than Fidelity China. However, Herald Investment Trust is 1.53 times less risky than Fidelity China. It trades about 0.5 of its potential returns per unit of risk. Fidelity China Special is currently generating about -0.02 per unit of risk. If you would invest 209,500 in Herald Investment Trust on September 5, 2024 and sell it today you would earn a total of 29,000 from holding Herald Investment Trust or generate 13.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Herald Investment Trust vs. Fidelity China Special
Performance |
| Timeline |
| Herald Investment Trust |
| Fidelity China Special |
Herald Investment and Fidelity China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herald Investment and Fidelity China
The main advantage of trading using opposite Herald Investment and Fidelity China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herald Investment position performs unexpectedly, Fidelity China 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 Fidelity China will offset losses from the drop in Fidelity China's long position.| Herald Investment vs. SupplyMe Capital PLC | Herald Investment vs. Lloyds Banking Group | Herald Investment vs. Premier African Minerals | Herald Investment vs. SANTANDER UK 8 |
| Fidelity China vs. SupplyMe Capital PLC | Fidelity China vs. Lloyds Banking Group | Fidelity China vs. Premier African Minerals | Fidelity China vs. SANTANDER UK 8 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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