Correlation Between Global X and Harvest Bank

Can any of the company-specific risk be diversified away by investing in both Global X and Harvest Bank 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 Global X and Harvest Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global X Semiconductor and Harvest Bank Leaders, you can compare the effects of market volatilities on Global X and Harvest Bank 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 Global X with a short position of Harvest Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global X and Harvest Bank.

Diversification Opportunities for Global X and Harvest Bank

0.79

Correlation Coefficient

Global X  Harvest Bank

Poor diversification

The 3 months correlation between Global and Harvest is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Global X Semiconductor and Harvest Bank Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Bank Leaders and Global X 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 Global X Semiconductor are associated (or correlated) with Harvest Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Bank Leaders has no effect on the direction of Global X i.e., Global X and Harvest Bank go up and down completely randomly.

Pair Corralation between Global X and Harvest Bank

Assuming the 90 days trading horizon Global X Semiconductor is expected to under-perform the Harvest Bank. In addition to that, Global X is 1.58 times more volatile than Harvest Bank Leaders. It trades about -0.07 of its total potential returns per unit of risk. Harvest Bank Leaders is currently generating about -0.03 per unit of volatility. If you would invest  1,322  in Harvest Bank Leaders on December 28, 2024 and sell it today you would lose (46.00) from holding Harvest Bank Leaders or give up 3.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Global X Semiconductor  vs.  Harvest Bank Leaders

Global X Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Harvest Bank Leaders

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harvest Bank Leaders has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Harvest Bank is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global X and Harvest Bank

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

The idea behind Global X Semiconductor and Harvest Bank Leaders 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.