Correlation Between Herald Investment and PPHE Hotel

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

Diversification Opportunities for Herald Investment and PPHE Hotel

0.39

Correlation Coefficient

Herald Investment  PPHE Hotel

Weak diversification

The 3 months correlation between Herald and PPHE is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and PPHE Hotel Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE Hotel Group 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 PPHE Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE Hotel Group has no effect on the direction of Herald Investment i.e., Herald Investment and PPHE Hotel go up and down completely randomly.

Pair Corralation between Herald Investment and PPHE Hotel

Assuming the 90 days trading horizon Herald Investment Trust is expected to under-perform the PPHE Hotel. But the stock apears to be less risky and, when comparing its historical volatility, Herald Investment Trust is 1.24 times less risky than PPHE Hotel. The stock trades about -0.19 of its potential returns per unit of risk. The PPHE Hotel Group is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  136,500  in PPHE Hotel Group on December 20, 2024 and sell it today you would lose (10,000) from holding PPHE Hotel Group or give up 7.33% 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.  PPHE Hotel Group

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 unsteady 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.

PPHE Hotel Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days PPHE Hotel Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Herald Investment and PPHE Hotel

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

The idea behind Herald Investment Trust and PPHE Hotel Group 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.