Correlation Between Herald Investment and Monks Investment

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

Diversification Opportunities for Herald Investment and Monks Investment

0.63

Correlation Coefficient

Herald Investment  Monks Investment

Poor diversification

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

Pair Corralation between Herald Investment and Monks Investment

Assuming the 90 days trading horizon Herald Investment Trust is expected to under-perform the Monks Investment. But the stock apears to be less risky and, when comparing its historical volatility, Herald Investment Trust is 1.02 times less risky than Monks Investment. The stock trades about -0.23 of its potential returns per unit of risk. The Monks Investment Trust is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  125,000  in Monks Investment Trust on December 30, 2024 and sell it today you would lose (6,200) from holding Monks Investment Trust or give up 4.96% of portfolio value over 90 days.

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

Herald Investment Trust  vs.  Monks 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 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.

Monks Investment Trust

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Herald Investment Trust and Monks 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.