Correlation Between Herald Investment and Metals Exploration

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

Diversification Opportunities for Herald Investment and Metals Exploration

-0.17

Correlation Coefficient

Herald Investment  Metals Exploration

Good diversification

The 3 months correlation between Herald and Metals is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Metals Exploration Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals Exploration Plc 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 Metals Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals Exploration Plc has no effect on the direction of Herald Investment i.e., Herald Investment and Metals Exploration go up and down completely randomly.

Pair Corralation between Herald Investment and Metals Exploration

Assuming the 90 days trading horizon Herald Investment is expected to generate 1.51 times less return on investment than Metals Exploration. But when comparing it to its historical volatility, Herald Investment Trust is 2.64 times less risky than Metals Exploration. It trades about 0.08 of its potential returns per unit of risk. Metals Exploration Plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  475.00  in Metals Exploration Plc on September 25, 2024 and sell it today you would earn a total of  60.00  from holding Metals Exploration Plc or generate 12.63% return on investment over 90 days.

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

Herald Investment Trust  vs.  Metals Exploration Plc

Herald Investment Trust

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 19 (%) 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.

Metals Exploration Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metals Exploration Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Metals Exploration is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Herald Investment and Metals Exploration

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

The idea behind Herald Investment Trust and Metals Exploration Plc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.