Correlation Between Cembra Money and Herald Investment

Can any of the company-specific risk be diversified away by investing in both Cembra Money 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 Cembra Money and Herald Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cembra Money Bank and Herald Investment Trust, you can compare the effects of market volatilities on Cembra Money 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 Cembra Money with a short position of Herald Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cembra Money and Herald Investment.

Diversification Opportunities for Cembra Money and Herald Investment

0.66

Correlation Coefficient

Cembra Money  Herald Investment

Poor diversification

The 3 months correlation between Cembra and Herald is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cembra Money Bank 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 Cembra Money 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 Cembra Money Bank 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 Cembra Money i.e., Cembra Money and Herald Investment go up and down completely randomly.

Pair Corralation between Cembra Money and Herald Investment

Assuming the 90 days trading horizon Cembra Money is expected to generate 2.89 times less return on investment than Herald Investment. But when comparing it to its historical volatility, Cembra Money Bank is 1.17 times less risky than Herald Investment. It trades about 0.14 of its potential returns per unit of risk. Herald Investment Trust is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  211,500  in Herald Investment Trust on October 7, 2024 and sell it today you would earn a total of  35,000  from holding Herald Investment Trust or generate 16.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cembra Money Bank  vs.  Herald Investment Trust

Cembra Money Bank

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cembra Money Bank are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cembra Money may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Herald Investment Trust

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Herald Investment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cembra Money and Herald Investment

The main advantage of trading using opposite Cembra Money and Herald Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cembra Money 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.

The idea behind Cembra Money Bank and Herald Investment Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.