Correlation Between Harvest Diversified and Global X

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

By analyzing existing cross correlation between Harvest Diversified Monthly and Global X Balanced, you can compare the effects of market volatilities on Harvest Diversified and Global X 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 Harvest Diversified with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harvest Diversified and Global X.

Diversification Opportunities for Harvest Diversified and Global X

0.8

Correlation Coefficient

Harvest Diversified  Global X

Very poor diversification

The 3 months correlation between Harvest and Global is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Harvest Diversified Monthly and Global X Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Balanced and Harvest Diversified 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 Harvest Diversified Monthly are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Balanced has no effect on the direction of Harvest Diversified i.e., Harvest Diversified and Global X go up and down completely randomly.

Pair Corralation between Harvest Diversified and Global X

Assuming the 90 days trading horizon Harvest Diversified Monthly is expected to under-perform the Global X. In addition to that, Harvest Diversified is 2.09 times more volatile than Global X Balanced. It trades about -0.18 of its total potential returns per unit of risk. Global X Balanced is currently generating about -0.05 per unit of volatility. If you would invest  1,610  in Global X Balanced on December 5, 2024 and sell it today you would lose (6.00) from holding Global X Balanced or give up 0.37% of portfolio value over 90 days.

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

Harvest Diversified Monthly  vs.  Global X Balanced

Harvest Diversified

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harvest Diversified Monthly has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Harvest Diversified is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Global X Balanced

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Balanced are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Global X is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Harvest Diversified and Global X

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

The idea behind Harvest Diversified Monthly and Global X Balanced 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.