Correlation Between Herald Investment and Monks Investment
Can any of the company-specific risk be diversified away by investing in both Herald Investment and Monks 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 Monks 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 Monks Investment Trust, you can compare the effects of market volatilities on Herald Investment and Monks 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 Monks Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Herald Investment and Monks Investment.
Diversification Opportunities for Herald Investment and Monks Investment
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Herald and Monks is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks 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 Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of Herald Investment i.e., Herald Investment and Monks Investment go up and down completely randomly.
Pair Corralation between Herald Investment and Monks Investment
Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 1.32 times more return on investment than Monks Investment. However, Herald Investment is 1.32 times more volatile than Monks Investment Trust. It trades about 0.37 of its potential returns per unit of risk. Monks Investment Trust is currently generating about 0.36 per unit of risk. If you would invest 211,000 in Herald Investment Trust on August 29, 2024 and sell it today you would earn a total of 22,500 from holding Herald Investment Trust or generate 10.66% 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. Monks Investment Trust
Performance |
| Timeline |
| Herald Investment Trust |
| Monks Investment Trust |
Herald Investment and Monks Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Herald Investment and Monks Investment
The main advantage of trading using opposite Herald Investment and Monks Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herald Investment position performs unexpectedly, Monks 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 Monks Investment will offset losses from the drop in Monks 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 |
| Monks Investment vs. Toyota Motor Corp | Monks Investment vs. Lendinvest PLC | Monks Investment vs. Neometals | Monks 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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