Correlation Between Premier African and Herald Investment

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

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

Diversification Opportunities for Premier African and Herald Investment

0.1

Correlation Coefficient

Premier African  Herald Investment

Average diversification

The 3 months correlation between Premier and Herald is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Premier African Minerals 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 Premier African 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 Premier African Minerals 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 Premier African i.e., Premier African and Herald Investment go up and down completely randomly.

Pair Corralation between Premier African and Herald Investment

Assuming the 90 days trading horizon Premier African Minerals is expected to generate 13.32 times more return on investment than Herald Investment. However, Premier African is 13.32 times more volatile than Herald Investment Trust. It trades about 0.03 of its potential returns per unit of risk. Herald Investment Trust is currently generating about 0.31 per unit of risk. If you would invest  5.65  in Premier African Minerals on September 12, 2024 and sell it today you would lose (0.95) from holding Premier African Minerals or give up 16.81% of portfolio value over 90 days.

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

Premier African Minerals  vs.  Herald Investment Trust

Premier African Minerals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Premier African Minerals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Premier African unveiled solid returns over the last few months and may actually be approaching a breakup point.

Herald Investment Trust

Risk-Adjusted Performance

24 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 24 (%) 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.

Pair Trading with Premier African and Herald Investment

The main advantage of trading using opposite Premier African and Herald Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier African 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 Premier African Minerals 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.