Correlation Between GM and Harbor Capital
Can any of the company-specific risk be diversified away by investing in both GM and Harbor Capital 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 GM and Harbor Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Harbor Capital Appreciation, you can compare the effects of market volatilities on GM and Harbor Capital 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 GM with a short position of Harbor Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Harbor Capital.
Diversification Opportunities for GM and Harbor Capital
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Harbor is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Harbor Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Capital Appre and GM 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 General Motors are associated (or correlated) with Harbor Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Capital Appre has no effect on the direction of GM i.e., GM and Harbor Capital go up and down completely randomly.
Pair Corralation between GM and Harbor Capital
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.55 times more return on investment than Harbor Capital. However, GM is 2.55 times more volatile than Harbor Capital Appreciation. It trades about 0.07 of its potential returns per unit of risk. Harbor Capital Appreciation is currently generating about 0.16 per unit of risk. If you would invest 5,273 in General Motors on August 29, 2024 and sell it today you would earn a total of 206.00 from holding General Motors or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Harbor Capital Appreciation
Performance |
| Timeline |
| General Motors |
| Harbor Capital Appre |
GM and Harbor Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Harbor Capital
The main advantage of trading using opposite GM and Harbor Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Harbor Capital 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 Harbor Capital will offset losses from the drop in Harbor Capital's long position.The idea behind General Motors and Harbor Capital Appreciation 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.| Harbor Capital vs. Harbor International Fund | Harbor Capital vs. Harbor Small Cap | Harbor Capital vs. Growth Fund Of | Harbor Capital vs. Growth Fund Of |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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