Correlation Between Stone Harbor and North American

Can any of the company-specific risk be diversified away by investing in both Stone Harbor and North American 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 North American 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 North American Financial, you can compare the effects of market volatilities on Stone Harbor and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Harbor and North American.

Diversification Opportunities for Stone Harbor and North American

0.12

Correlation Coefficient

Stone Harbor  North American

Average diversification

The 3 months correlation between Stone and North is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Stone Harbor Emerging and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Stone Harbor i.e., Stone Harbor and North American go up and down completely randomly.

Pair Corralation between Stone Harbor and North American

Considering the 90-day investment horizon Stone Harbor Emerging is expected to generate 0.37 times more return on investment than North American. However, Stone Harbor Emerging is 2.68 times less risky than North American. It trades about 0.18 of its potential returns per unit of risk. North American Financial is currently generating about -0.05 per unit of risk. If you would invest  455.00  in Stone Harbor Emerging on December 28, 2024 and sell it today you would earn a total of  53.00  from holding Stone Harbor Emerging or generate 11.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.0%
Values	Daily Returns

Stone Harbor Emerging  vs.  North American Financial

Stone Harbor Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Harbor Emerging are ranked lower than 14 (%) 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.

North American Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days North American Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Stone Harbor and North American

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

The idea behind Stone Harbor Emerging and North American Financial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.