Correlation Between Harvest Global and Topicus

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

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

Diversification Opportunities for Harvest Global and Topicus

0.77

Correlation Coefficient

Harvest Global  Topicus

Poor diversification

The 3 months correlation between Harvest and Topicus is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Harvest Global REIT and Topicus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topicus and Harvest Global 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 Global REIT are associated (or correlated) with Topicus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topicus has no effect on the direction of Harvest Global i.e., Harvest Global and Topicus go up and down completely randomly.

Pair Corralation between Harvest Global and Topicus

Assuming the 90 days trading horizon Harvest Global is expected to generate 5.14 times less return on investment than Topicus. But when comparing it to its historical volatility, Harvest Global REIT is 2.35 times less risky than Topicus. It trades about 0.06 of its potential returns per unit of risk. Topicus is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  12,180  in Topicus on December 30, 2024 and sell it today you would earn a total of  2,305  from holding Topicus or generate 18.92% return on investment over 90 days.

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

Harvest Global REIT  vs.  Topicus

Harvest Global REIT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Global REIT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Harvest Global is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Topicus

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Topicus are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Topicus showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harvest Global and Topicus

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

The idea behind Harvest Global REIT and Topicus 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .