Correlation Between Malvern International and Herald Investment

Can any of the company-specific risk be diversified away by investing in both Malvern International and Herald 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 Malvern International and Herald Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Malvern International and Herald Investment Trust, you can compare the effects of market volatilities on Malvern International and Herald 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 Malvern International with a short position of Herald Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Malvern International and Herald Investment.

Diversification Opportunities for Malvern International and Herald Investment

0.83

Correlation Coefficient

Malvern International  Herald Investment

Very poor diversification

The 3 months correlation between Malvern and Herald is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Malvern International and Herald Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herald Investment Trust and Malvern International 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 Malvern International are associated (or correlated) with Herald Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herald Investment Trust has no effect on the direction of Malvern International i.e., Malvern International and Herald Investment go up and down completely randomly.

Pair Corralation between Malvern International and Herald Investment

Assuming the 90 days trading horizon Malvern International is expected to generate 1.29 times less return on investment than Herald Investment. In addition to that, Malvern International is 1.57 times more volatile than Herald Investment Trust. It trades about 0.07 of its total potential returns per unit of risk. Herald Investment Trust is currently generating about 0.15 per unit of volatility. If you would invest  209,000  in Herald Investment Trust on October 22, 2024 and sell it today you would earn a total of  25,000  from holding Herald Investment Trust or generate 11.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Malvern International  vs.  Herald Investment Trust

Malvern International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Malvern International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Malvern International may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Herald Investment Trust

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Herald Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Malvern International and Herald Investment

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

The idea behind Malvern International and Herald 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..