Correlation Between Herald Investment and Kinnevik Investment

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

Diversification Opportunities for Herald Investment and Kinnevik Investment

-0.03

Correlation Coefficient

Herald Investment  Kinnevik Investment

Good diversification

The 3 months correlation between Herald and Kinnevik is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Herald Investment Trust and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment 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 Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of Herald Investment i.e., Herald Investment and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Herald Investment and Kinnevik Investment

Assuming the 90 days trading horizon Herald Investment Trust is expected to generate 0.41 times more return on investment than Kinnevik Investment. However, Herald Investment Trust is 2.46 times less risky than Kinnevik Investment. It trades about 0.29 of its potential returns per unit of risk. Kinnevik Investment AB is currently generating about 0.05 per unit of risk. If you would invest  207,500  in Herald Investment Trust on September 13, 2024 and sell it today you would earn a total of  36,500  from holding Herald Investment Trust or generate 17.59% 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.  Kinnevik Investment AB

Herald Investment Trust

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Herald Investment Trust are ranked lower than 22 (%) 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.

Kinnevik Investment

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kinnevik Investment AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Kinnevik Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Herald Investment and Kinnevik Investment

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

The idea behind Herald Investment Trust and Kinnevik Investment AB 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.