Correlation Between Herald Investment and Ross Stores

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

Diversification Opportunities for Herald Investment and Ross Stores

0.1

Correlation Coefficient

Herald Investment  Ross Stores

Average diversification

The 3 months correlation between Herald and Ross is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Herald Investment i.e., Herald Investment and Ross Stores go up and down completely randomly.

Pair Corralation between Herald Investment and Ross Stores

Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 0.7 times more return on investment than Ross Stores. However, Herald Investment Trust is 1.43 times less risky than Ross Stores. It trades about 0.17 of its potential returns per unit of risk. Ross Stores is currently generating about 0.04 per unit of risk. If you would invest  213,500  in Herald Investment Trust on September 3, 2024 and sell it today you would earn a total of  23,500  from holding Herald Investment Trust or generate 11.01% 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.  Ross Stores

Herald Investment Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 13 (%) 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.

Ross Stores

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ross Stores are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Ross Stores is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Herald Investment and Ross Stores

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

The idea behind Herald Investment Trust and Ross Stores 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.