Correlation Between Embark Small and Harbor Capital

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

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

Diversification Opportunities for Embark Small and Harbor Capital

0.86

Correlation Coefficient

Embark Small  Harbor Capital

Very poor diversification

The 3 months correlation between Embark and Harbor is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Embark Small Cap and Harbor Capital Appreciation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Capital Appre and Embark 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 Embark Small Cap are associated (or correlated) with Harbor Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Capital Appre has no effect on the direction of Embark Small i.e., Embark Small and Harbor Capital go up and down completely randomly.

Pair Corralation between Embark Small and Harbor Capital

Assuming the 90 days horizon Embark Small is expected to generate 1.02 times less return on investment than Harbor Capital. In addition to that, Embark Small is 1.02 times more volatile than Harbor Capital Appreciation. It trades about 0.16 of its total potential returns per unit of risk. Harbor Capital Appreciation is currently generating about 0.17 per unit of volatility. If you would invest  10,365  in Harbor Capital Appreciation on August 31, 2024 and sell it today you would earn a total of  1,153  from holding Harbor Capital Appreciation or generate 11.12% return on investment over 90 days.

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

Embark Small Cap  vs.  Harbor Capital Appreciation

Embark Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Embark Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Embark Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Harbor Capital Appre

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Capital Appreciation are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Harbor Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Embark Small and Harbor Capital

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

The idea behind Embark Small Cap and Harbor Capital Appreciation 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .