Correlation Between Stone Harbor and China Fund

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

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

Diversification Opportunities for Stone Harbor and China Fund

0.41

Correlation Coefficient

Stone Harbor  China Fund

Very weak diversification

The 3 months correlation between Stone and China is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Stone Harbor Emerging and China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Fund and Stone Harbor 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 Stone Harbor Emerging are associated (or correlated) with China Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Fund has no effect on the direction of Stone Harbor i.e., Stone Harbor and China Fund go up and down completely randomly.

Pair Corralation between Stone Harbor and China Fund

Considering the 90-day investment horizon Stone Harbor is expected to generate 1.0 times less return on investment than China Fund. But when comparing it to its historical volatility, Stone Harbor Emerging is 1.45 times less risky than China Fund. It trades about 0.22 of its potential returns per unit of risk. China Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,164  in China Fund on December 2, 2024 and sell it today you would earn a total of  114.00  from holding China Fund or generate 9.79% return on investment over 90 days.

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

Stone Harbor Emerging  vs.  China Fund

Stone Harbor Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Harbor Emerging are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly inconsistent fundamental indicators, Stone Harbor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

China Fund

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in China Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile technical indicators, China Fund may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Stone Harbor and China Fund

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

The idea behind Stone Harbor Emerging and China 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.