Correlation Between Investment and Herald Investment
Can any of the company-specific risk be diversified away by investing in both Investment and Herald 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 Investment and Herald Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Investment and Herald Investment Trust, you can compare the effects of market volatilities on Investment and Herald 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 Investment with a short position of Herald Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment and Herald Investment.
Diversification Opportunities for Investment and Herald Investment
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Investment and Herald is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Investment and Herald Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herald Investment Trust and 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 The Investment are associated (or correlated) with Herald Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herald Investment Trust has no effect on the direction of Investment i.e., Investment and Herald Investment go up and down completely randomly.
Pair Corralation between Investment and Herald Investment
Assuming the 90 days trading horizon Investment is expected to generate 3.28 times less return on investment than Herald Investment. But when comparing it to its historical volatility, The Investment is 1.8 times less risky than Herald Investment. It trades about 0.08 of its potential returns per unit of risk. Herald Investment Trust is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 216,000 in Herald Investment Trust on August 30, 2024 and sell it today you would earn a total of 20,000 from holding Herald Investment Trust or generate 9.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Investment vs. Herald Investment Trust
Performance |
| Timeline |
| Investment |
| Herald Investment Trust |
Investment and Herald Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment and Herald Investment
The main advantage of trading using opposite Investment and Herald Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment position performs unexpectedly, Herald 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 Herald Investment will offset losses from the drop in Herald Investment's long position.| Investment vs. Associated British Foods | Investment vs. United States Steel | Investment vs. Premier Foods PLC | Investment vs. Axfood AB |
| Herald Investment vs. Alaska Air Group | Herald Investment vs. Public Storage | Herald Investment vs. JD Sports Fashion | Herald Investment vs. Datagroup SE |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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