Correlation Between Harbor Mid and Harbor International
Can any of the company-specific risk be diversified away by investing in both Harbor Mid and Harbor International 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 Harbor Mid and Harbor International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Harbor Mid Cap and Harbor International Small, you can compare the effects of market volatilities on Harbor Mid and Harbor International 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 Harbor Mid with a short position of Harbor International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbor Mid and Harbor International.
Diversification Opportunities for Harbor Mid and Harbor International
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Harbor and Harbor is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Mid Cap and Harbor International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor International and Harbor Mid 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 Harbor Mid Cap are associated (or correlated) with Harbor International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor International has no effect on the direction of Harbor Mid i.e., Harbor Mid and Harbor International go up and down completely randomly.
Pair Corralation between Harbor Mid and Harbor International
Assuming the 90 days horizon Harbor Mid Cap is expected to generate 1.34 times more return on investment than Harbor International. However, Harbor Mid is 1.34 times more volatile than Harbor International Small. It trades about 0.14 of its potential returns per unit of risk. Harbor International Small is currently generating about -0.34 per unit of risk. If you would invest 2,774 in Harbor Mid Cap on August 28, 2024 and sell it today you would earn a total of 163.00 from holding Harbor Mid Cap or generate 5.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harbor Mid Cap vs. Harbor International Small
Performance |
| Timeline |
| Harbor Mid Cap |
| Harbor International |
Harbor Mid and Harbor International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harbor Mid and Harbor International
The main advantage of trading using opposite Harbor Mid and Harbor International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harbor Mid position performs unexpectedly, Harbor International 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 International will offset losses from the drop in Harbor International's long position.The idea behind Harbor Mid Cap and Harbor International Small 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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