Correlation Between Harbor Convertible and Harbor Small

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

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

Diversification Opportunities for Harbor Convertible and Harbor Small

0.79

Correlation Coefficient

Harbor Convertible  Harbor Small

Poor diversification

The 3 months correlation between Harbor and Harbor is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Vertible Securities and Harbor Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Small Cap and Harbor Convertible 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 Vertible Securities are associated (or correlated) with Harbor Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Small Cap has no effect on the direction of Harbor Convertible i.e., Harbor Convertible and Harbor Small go up and down completely randomly.

Pair Corralation between Harbor Convertible and Harbor Small

Assuming the 90 days horizon Harbor Vertible Securities is expected to generate 0.68 times more return on investment than Harbor Small. However, Harbor Vertible Securities is 1.47 times less risky than Harbor Small. It trades about -0.01 of its potential returns per unit of risk. Harbor Small Cap is currently generating about -0.15 per unit of risk. If you would invest  1,140  in Harbor Vertible Securities on December 29, 2024 and sell it today you would lose (7.00) from holding Harbor Vertible Securities or give up 0.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Harbor Vertible Securities  vs.  Harbor Small Cap

Harbor Vertible Secu

Risk-Adjusted Performance

Very Weak

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

Harbor Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harbor Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Harbor Convertible and Harbor Small

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

The idea behind Harbor Vertible Securities and Harbor Small 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.