Correlation Between Herald Investment and Capital Drilling

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

Diversification Opportunities for Herald Investment and Capital Drilling

-0.4

Correlation Coefficient

Herald Investment  Capital Drilling

Very good diversification

The 3 months correlation between Herald and Capital is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Capital Drilling in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Drilling 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 Capital Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Drilling has no effect on the direction of Herald Investment i.e., Herald Investment and Capital Drilling go up and down completely randomly.

Pair Corralation between Herald Investment and Capital Drilling

Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 0.55 times more return on investment than Capital Drilling. However, Herald Investment Trust is 1.82 times less risky than Capital Drilling. It trades about 0.26 of its potential returns per unit of risk. Capital Drilling is currently generating about -0.02 per unit of risk. If you would invest  209,000  in Herald Investment Trust on October 10, 2024 and sell it today you would earn a total of  39,000  from holding Herald Investment Trust or generate 18.66% return on investment over 90 days.

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

Herald Investment Trust  vs.  Capital Drilling

Herald Investment Trust

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 20 (%) 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.

Capital Drilling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capital Drilling 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 Capital Drilling

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

The idea behind Herald Investment Trust and Capital Drilling 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.