Correlation Between Harbor International and Large Cap
Can any of the company-specific risk be diversified away by investing in both Harbor International and Large Cap 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 International and Large Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Harbor International Fund and Large Cap Fund, you can compare the effects of market volatilities on Harbor International and Large Cap 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 International with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbor International and Large Cap.
Diversification Opportunities for Harbor International and Large Cap
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Harbor and Large is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Harbor International Fund and Large Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Fund and Harbor International 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 International Fund are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Fund has no effect on the direction of Harbor International i.e., Harbor International and Large Cap go up and down completely randomly.
Pair Corralation between Harbor International and Large Cap
Assuming the 90 days horizon Harbor International Fund is expected to under-perform the Large Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Harbor International Fund is 1.19 times less risky than Large Cap. The mutual fund trades about -0.1 of its potential returns per unit of risk. The Large Cap Fund is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 1,684 in Large Cap Fund on August 29, 2024 and sell it today you would earn a total of 89.00 from holding Large Cap Fund or generate 5.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Harbor International Fund vs. Large Cap Fund
Performance |
| Timeline |
| Harbor International |
| Large Cap Fund |
Harbor International and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Harbor International and Large Cap
The main advantage of trading using opposite Harbor International and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harbor International position performs unexpectedly, Large Cap 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 Large Cap will offset losses from the drop in Large Cap's long position.The idea behind Harbor International Fund and Large Cap Fund 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.
| Large Cap vs. Vanguard Total Stock | Large Cap vs. Vanguard 500 Index | Large Cap vs. Vanguard Total Stock | Large Cap vs. Vanguard Total Stock |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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