Correlation Between Herald Investment and Paccar

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

Diversification Opportunities for Herald Investment and Paccar

0.71

Correlation Coefficient

Herald Investment  Paccar

Poor diversification

The 3 months correlation between Herald and Paccar is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Paccar Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paccar Inc 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 Paccar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paccar Inc has no effect on the direction of Herald Investment i.e., Herald Investment and Paccar go up and down completely randomly.

Pair Corralation between Herald Investment and Paccar

Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 0.57 times more return on investment than Paccar. However, Herald Investment Trust is 1.76 times less risky than Paccar. It trades about 0.24 of its potential returns per unit of risk. Paccar Inc is currently generating about 0.09 per unit of risk. If you would invest  206,000  in Herald Investment Trust on September 25, 2024 and sell it today you would earn a total of  36,500  from holding Herald Investment Trust or generate 17.72% return on investment over 90 days.

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

Herald Investment Trust  vs.  Paccar Inc

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.

Paccar Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Paccar Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Paccar may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Herald Investment and Paccar

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

The idea behind Herald Investment Trust and Paccar Inc 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.