Correlation Between Harding Loevner and Rising Rates

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

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

Diversification Opportunities for Harding Loevner and Rising Rates

-0.71

Correlation Coefficient

Harding Loevner  Rising Rates

Pay attention - limited upside

The 3 months correlation between Harding and Rising is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Harding Loevner Global and Rising Rates Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rising Rates Opportunity and Harding Loevner 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 Harding Loevner Global are associated (or correlated) with Rising Rates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rising Rates Opportunity has no effect on the direction of Harding Loevner i.e., Harding Loevner and Rising Rates go up and down completely randomly.

Pair Corralation between Harding Loevner and Rising Rates

Assuming the 90 days horizon Harding Loevner Global is expected to generate 0.87 times more return on investment than Rising Rates. However, Harding Loevner Global is 1.14 times less risky than Rising Rates. It trades about 0.17 of its potential returns per unit of risk. Rising Rates Opportunity is currently generating about 0.1 per unit of risk. If you would invest  3,460  in Harding Loevner Global on October 27, 2024 and sell it today you would earn a total of  82.00  from holding Harding Loevner Global or generate 2.37% return on investment over 90 days.

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

Harding Loevner Global  vs.  Rising Rates Opportunity

Harding Loevner Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harding Loevner Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Rising Rates Opportunity

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rising Rates Opportunity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rising Rates may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Harding Loevner and Rising Rates

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

The idea behind Harding Loevner Global and Rising Rates Opportunity 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.