Correlation Between Herald Investment and Miton UK

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

Diversification Opportunities for Herald Investment and Miton UK

0.26

Correlation Coefficient

Herald Investment  Miton UK

Modest diversification

The 3 months correlation between Herald and Miton is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Miton UK MicroCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miton UK MicroCap 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 Miton UK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miton UK MicroCap has no effect on the direction of Herald Investment i.e., Herald Investment and Miton UK go up and down completely randomly.

Pair Corralation between Herald Investment and Miton UK

Assuming the 90 days trading horizon Herald Investment Trust is expected to under-perform the Miton UK. In addition to that, Herald Investment is 1.74 times more volatile than Miton UK MicroCap. It trades about -0.21 of its total potential returns per unit of risk. Miton UK MicroCap is currently generating about 0.01 per unit of volatility. If you would invest  4,500  in Miton UK MicroCap on December 22, 2024 and sell it today you would earn a total of  20.00  from holding Miton UK MicroCap or generate 0.44% return on investment over 90 days.

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

Herald Investment Trust  vs.  Miton UK MicroCap

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.

Miton UK MicroCap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Miton UK MicroCap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Miton UK 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 Miton UK

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

The idea behind Herald Investment Trust and Miton UK MicroCap 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.