Correlation Between Embark Small and Harbor Mid

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

Diversification Opportunities for Embark Small and Harbor Mid

0.94

Correlation Coefficient

Embark Small  Harbor Mid

Almost no diversification

The 3 months correlation between Embark and Harbor is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Embark Small Cap and Harbor Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Mid Cap 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 Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Mid Cap has no effect on the direction of Embark Small i.e., Embark Small and Harbor Mid go up and down completely randomly.

Pair Corralation between Embark Small and Harbor Mid

Assuming the 90 days horizon Embark Small is expected to generate 1.36 times less return on investment than Harbor Mid. In addition to that, Embark Small is 1.01 times more volatile than Harbor Mid Cap. It trades about 0.16 of its total potential returns per unit of risk. Harbor Mid Cap is currently generating about 0.22 per unit of volatility. If you would invest  578.00  in Harbor Mid Cap on September 3, 2024 and sell it today you would earn a total of  88.00  from holding Harbor Mid Cap or generate 15.22% return on investment over 90 days.

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

Embark Small Cap  vs.  Harbor Mid Cap

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 January 2025.

Harbor Mid Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Mid Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Harbor Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Embark Small and Harbor Mid

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

The idea behind Embark Small Cap and Harbor Mid Cap 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.