Correlation Between Harbor Small and Classic Value

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

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

Diversification Opportunities for Harbor Small and Classic Value

0.98

Correlation Coefficient

Harbor Small  Classic Value

Almost no diversification

The 3 months correlation between Harbor and Classic is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Small Cap and Classic Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Classic Value and Harbor 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 Harbor Small Cap are associated (or correlated) with Classic Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Classic Value has no effect on the direction of Harbor Small i.e., Harbor Small and Classic Value go up and down completely randomly.

Pair Corralation between Harbor Small and Classic Value

Assuming the 90 days horizon Harbor Small Cap is expected to generate 1.3 times more return on investment than Classic Value. However, Harbor Small is 1.3 times more volatile than Classic Value Fund. It trades about 0.03 of its potential returns per unit of risk. Classic Value Fund is currently generating about -0.03 per unit of risk. If you would invest  4,449  in Harbor Small Cap on September 17, 2024 and sell it today you would earn a total of  20.00  from holding Harbor Small Cap or generate 0.45% return on investment over 90 days.

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

Harbor Small Cap  vs.  Classic Value Fund

Harbor Small Cap

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Small Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Harbor Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Classic Value

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Classic Value Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Classic Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Harbor Small and Classic Value

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

The idea behind Harbor Small Cap and Classic Value Fund 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.