Correlation Between Northern Small and Harbor International
Can any of the company-specific risk be diversified away by investing in both Northern Small 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 Northern Small and Harbor International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Small Cap and Harbor International Fund, you can compare the effects of market volatilities on Northern Small 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 Northern Small with a short position of Harbor International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and Harbor International.
Diversification Opportunities for Northern Small and Harbor International
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Northern and Harbor is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and Harbor International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor International and Northern Small 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 Northern Small 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 Northern Small i.e., Northern Small and Harbor International go up and down completely randomly.
Pair Corralation between Northern Small and Harbor International
Assuming the 90 days horizon Northern Small Cap is expected to generate 1.6 times more return on investment than Harbor International. However, Northern Small is 1.6 times more volatile than Harbor International Fund. It trades about 0.08 of its potential returns per unit of risk. Harbor International Fund is currently generating about -0.01 per unit of risk. If you would invest 1,963 in Northern Small Cap on August 29, 2024 and sell it today you would earn a total of 284.00 from holding Northern Small Cap or generate 14.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Small Cap vs. Harbor International Fund
Performance |
| Timeline |
| Northern Small Cap |
| Harbor International |
Northern Small and Harbor International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and Harbor International
The main advantage of trading using opposite Northern Small and Harbor International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small 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.| Northern Small vs. Vanguard Small Cap Value | Northern Small vs. Vanguard Small Cap Value | Northern Small vs. Us Small Cap | Northern Small vs. Us Targeted Value |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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