Correlation Between Harding Loevner and International Opportunity

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

By analyzing existing cross correlation between Harding Loevner Frontier and International Opportunity Portfolio, you can compare the effects of market volatilities on Harding Loevner and International Opportunity 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 International Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harding Loevner and International Opportunity.

Diversification Opportunities for Harding Loevner and International Opportunity

0.21

Correlation Coefficient

Harding Loevner  International Opportunity

Modest diversification

The 3 months correlation between Harding and International is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Harding Loevner Frontier and International Opportunity Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International 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 Frontier are associated (or correlated) with International Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Opportunity has no effect on the direction of Harding Loevner i.e., Harding Loevner and International Opportunity go up and down completely randomly.

Pair Corralation between Harding Loevner and International Opportunity

Assuming the 90 days horizon Harding Loevner Frontier is expected to under-perform the International Opportunity. But the mutual fund apears to be less risky and, when comparing its historical volatility, Harding Loevner Frontier is 1.83 times less risky than International Opportunity. The mutual fund trades about -0.08 of its potential returns per unit of risk. The International Opportunity Portfolio is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,850  in International Opportunity Portfolio on October 10, 2024 and sell it today you would lose (63.00) from holding International Opportunity Portfolio or give up 2.21% of portfolio value over 90 days.

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

Harding Loevner Frontier  vs.  International Opportunity Port

Harding Loevner Frontier

Risk-Adjusted Performance

0 of 100

Very Weak

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

International Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Harding Loevner and International Opportunity

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

The idea behind Harding Loevner Frontier and International Opportunity Portfolio 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.