Correlation Between Herald Investment and New Residential

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

Diversification Opportunities for Herald Investment and New Residential

0.01

Correlation Coefficient

Herald Investment  New Residential

Significant diversification

The 3 months correlation between Herald and New is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Herald Investment i.e., Herald Investment and New Residential go up and down completely randomly.

Pair Corralation between Herald Investment and New Residential

Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 1.44 times more return on investment than New Residential. However, Herald Investment is 1.44 times more volatile than New Residential Investment. It trades about 0.47 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.46 per unit of risk. If you would invest  209,500  in Herald Investment Trust on September 3, 2024 and sell it today you would earn a total of  26,000  from holding Herald Investment Trust or generate 12.41% return on investment over 90 days.

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

Herald Investment Trust  vs.  New Residential Investment

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.

New Residential Inve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Residential Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, New Residential is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Herald Investment and New Residential

The main advantage of trading using opposite Herald Investment and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Herald Investment position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.

The idea behind Herald Investment Trust and New Residential Investment 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.