Correlation Between Large Cap and Harbor Mid

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

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

Diversification Opportunities for Large Cap and Harbor Mid

-0.14

Correlation Coefficient

Large Cap  Harbor Mid

Good diversification

The 3 months correlation between Large and Harbor is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap Fund 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 Large Cap 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 Large Cap Fund 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 Large Cap i.e., Large Cap and Harbor Mid go up and down completely randomly.

Pair Corralation between Large Cap and Harbor Mid

Assuming the 90 days horizon Large Cap Fund is expected to generate 1.69 times more return on investment than Harbor Mid. However, Large Cap is 1.69 times more volatile than Harbor Mid Cap. It trades about 0.03 of its potential returns per unit of risk. Harbor Mid Cap is currently generating about -0.05 per unit of risk. If you would invest  1,454  in Large Cap Fund on December 28, 2024 and sell it today you would earn a total of  22.00  from holding Large Cap Fund or generate 1.51% return on investment over 90 days.

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

Large Cap Fund  vs.  Harbor Mid Cap

Large Cap Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Large Cap Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Large Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Harbor Mid Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Large Cap and Harbor Mid

The main advantage of trading using opposite Large Cap and Harbor Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large Cap 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 Large Cap Fund 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 Transaction History module to view history of all your transactions and understand their impact on performance.