Correlation Between Financial and Stone Harbor

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

By analyzing existing cross correlation between Financial 15 Split and Stone Harbor Emerging, you can compare the effects of market volatilities on Financial and Stone Harbor 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 Financial with a short position of Stone Harbor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial and Stone Harbor.

Diversification Opportunities for Financial and Stone Harbor

-0.33

Correlation Coefficient

Financial  Stone Harbor

Very good diversification

The 3 months correlation between Financial and Stone is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and Stone Harbor Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Harbor Emerging and Financial 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 Financial 15 Split are associated (or correlated) with Stone Harbor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Harbor Emerging has no effect on the direction of Financial i.e., Financial and Stone Harbor go up and down completely randomly.

Pair Corralation between Financial and Stone Harbor

Assuming the 90 days horizon Financial 15 Split is expected to generate 1.52 times more return on investment than Stone Harbor. However, Financial is 1.52 times more volatile than Stone Harbor Emerging. It trades about 0.17 of its potential returns per unit of risk. Stone Harbor Emerging is currently generating about -0.01 per unit of risk. If you would invest  623.00  in Financial 15 Split on September 1, 2024 and sell it today you would earn a total of  105.00  from holding Financial 15 Split or generate 16.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Financial 15 Split  vs.  Stone Harbor Emerging

Financial 15 Split

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Stone Harbor Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stone Harbor Emerging has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable fundamental indicators, Stone Harbor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Financial and Stone Harbor

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

The idea behind Financial 15 Split and Stone Harbor 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.