Correlation Between Herald Investment and Hansa Investment

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

Diversification Opportunities for Herald Investment and Hansa Investment

0.22

Correlation Coefficient

Herald Investment  Hansa Investment

Modest diversification

The 3 months correlation between Herald and Hansa is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Hansa Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hansa Investment 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 Hansa Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hansa Investment has no effect on the direction of Herald Investment i.e., Herald Investment and Hansa Investment go up and down completely randomly.

Pair Corralation between Herald Investment and Hansa Investment

Assuming the 90 days trading horizon Herald Investment Trust is expected to under-perform the Hansa Investment. But the stock apears to be less risky and, when comparing its historical volatility, Herald Investment Trust is 1.3 times less risky than Hansa Investment. The stock trades about -0.23 of its potential returns per unit of risk. The Hansa Investment is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  22,818  in Hansa Investment on December 30, 2024 and sell it today you would lose (1,418) from holding Hansa Investment or give up 6.21% of portfolio value over 90 days.

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

Herald Investment Trust  vs.  Hansa Investment

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 uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hansa Investment

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Herald Investment Trust and Hansa 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.