Correlation Between Bankers Investment and Herald Investment

Can any of the company-specific risk be diversified away by investing in both Bankers 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 Bankers 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 Bankers Investment Trust and Herald Investment Trust, you can compare the effects of market volatilities on Bankers 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 Bankers Investment with a short position of Herald Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankers Investment and Herald Investment.

Diversification Opportunities for Bankers Investment and Herald Investment

0.8

Correlation Coefficient

Bankers Investment  Herald Investment

Very poor diversification

The 3 months correlation between Bankers and Herald is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bankers Investment Trust 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 Bankers 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 Bankers Investment Trust 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 Bankers Investment i.e., Bankers Investment and Herald Investment go up and down completely randomly.

Pair Corralation between Bankers Investment and Herald Investment

Assuming the 90 days trading horizon Bankers Investment is expected to generate 1.71 times less return on investment than Herald Investment. But when comparing it to its historical volatility, Bankers Investment Trust is 1.45 times less risky than Herald Investment. It trades about 0.13 of its potential returns per unit of risk. Herald Investment Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  213,500  in Herald Investment Trust on September 3, 2024 and sell it today you would earn a total of  22,000  from holding Herald Investment Trust or generate 10.3% return on investment over 90 days.

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

Bankers Investment Trust  vs.  Herald Investment Trust

Bankers Investment Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bankers Investment Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bankers Investment is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Herald Investment Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Herald Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Bankers Investment and Herald Investment

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

The idea behind Bankers Investment Trust 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..