Correlation Between Amcap Fund and Harding Loevner

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

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

Diversification Opportunities for Amcap Fund and Harding Loevner

-0.31

Correlation Coefficient

Amcap Fund  Harding Loevner

Very good diversification

The 3 months correlation between Amcap and Harding is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Harding Loevner Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Emerging and Amcap Fund 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 Amcap Fund Class are associated (or correlated) with Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Emerging has no effect on the direction of Amcap Fund i.e., Amcap Fund and Harding Loevner go up and down completely randomly.

Pair Corralation between Amcap Fund and Harding Loevner

Assuming the 90 days horizon Amcap Fund Class is expected to under-perform the Harding Loevner. In addition to that, Amcap Fund is 1.28 times more volatile than Harding Loevner Emerging. It trades about -0.08 of its total potential returns per unit of risk. Harding Loevner Emerging is currently generating about 0.06 per unit of volatility. If you would invest  3,644  in Harding Loevner Emerging on December 21, 2024 and sell it today you would earn a total of  101.00  from holding Harding Loevner Emerging or generate 2.77% return on investment over 90 days.

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

Amcap Fund Class  vs.  Harding Loevner Emerging

Amcap Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amcap Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Amcap Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Harding Loevner Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harding Loevner Emerging are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Harding Loevner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Amcap Fund and Harding Loevner

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

The idea behind Amcap Fund Class and Harding Loevner Emerging 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.