Correlation Between Embark Commodity and Harbor Bond

Can any of the company-specific risk be diversified away by investing in both Embark Commodity and Harbor Bond 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 Embark Commodity and Harbor Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Embark Commodity Strategy and Harbor Bond Fund, you can compare the effects of market volatilities on Embark Commodity and Harbor Bond 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 Embark Commodity with a short position of Harbor Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embark Commodity and Harbor Bond.

Diversification Opportunities for Embark Commodity and Harbor Bond

0.65

Correlation Coefficient

Embark Commodity  Harbor Bond

Poor diversification

The 3 months correlation between Embark and Harbor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Embark Commodity Strategy and Harbor Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Bond Fund and Embark Commodity 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 Embark Commodity Strategy are associated (or correlated) with Harbor Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Bond Fund has no effect on the direction of Embark Commodity i.e., Embark Commodity and Harbor Bond go up and down completely randomly.

Pair Corralation between Embark Commodity and Harbor Bond

Assuming the 90 days horizon Embark Commodity Strategy is expected to generate 2.17 times more return on investment than Harbor Bond. However, Embark Commodity is 2.17 times more volatile than Harbor Bond Fund. It trades about 0.2 of its potential returns per unit of risk. Harbor Bond Fund is currently generating about 0.13 per unit of risk. If you would invest  1,010  in Embark Commodity Strategy on December 29, 2024 and sell it today you would earn a total of  81.00  from holding Embark Commodity Strategy or generate 8.02% return on investment over 90 days.

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

Embark Commodity Strategy  vs.  Harbor Bond Fund

Embark Commodity Strategy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embark Commodity Strategy are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Embark Commodity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Harbor Bond Fund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Bond Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Harbor Bond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Embark Commodity and Harbor Bond

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

The idea behind Embark Commodity Strategy and Harbor Bond 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.