Correlation Between Herald Investment and Bankers Investment

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

Diversification Opportunities for Herald Investment and Bankers Investment

-0.63

Correlation Coefficient

Herald Investment  Bankers Investment

Excellent diversification

The 3 months correlation between Herald and Bankers is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Bankers Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bankers Investment Trust 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 Bankers Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bankers Investment Trust has no effect on the direction of Herald Investment i.e., Herald Investment and Bankers Investment go up and down completely randomly.

Pair Corralation between Herald Investment and Bankers Investment

Assuming the 90 days trading horizon Herald Investment Trust is expected to under-perform the Bankers Investment. In addition to that, Herald Investment is 1.0 times more volatile than Bankers Investment Trust. It trades about -0.31 of its total potential returns per unit of risk. Bankers Investment Trust is currently generating about -0.12 per unit of volatility. If you would invest  12,420  in Bankers Investment Trust on December 1, 2024 and sell it today you would lose (300.00) from holding Bankers Investment Trust or give up 2.42% of portfolio value over 90 days.

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

Herald Investment Trust  vs.  Bankers Investment Trust

Herald Investment Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Herald Investment Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Bankers Investment Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bankers Investment Trust are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of comparatively stable basic indicators, Bankers Investment 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 Bankers Investment

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

The idea behind Herald Investment Trust and Bankers 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.