Correlation Between Harding Loevner and Global X

Can any of the company-specific risk be diversified away by investing in both Harding Loevner 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 Harding Loevner and Global X 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 Global X, you can compare the effects of market volatilities on Harding Loevner 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 Harding Loevner with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harding Loevner and Global X.

Diversification Opportunities for Harding Loevner and Global X

-0.69

Correlation Coefficient

Harding Loevner  Global X

Excellent diversification

The 3 months correlation between Harding and Global is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Harding Loevner Frontier and Global X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X 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 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 has no effect on the direction of Harding Loevner i.e., Harding Loevner and Global X go up and down completely randomly.

Pair Corralation between Harding Loevner and Global X

Assuming the 90 days horizon Harding Loevner is expected to generate 18.23 times less return on investment than Global X. But when comparing it to its historical volatility, Harding Loevner Frontier is 1.47 times less risky than Global X. It trades about 0.06 of its potential returns per unit of risk. Global X is currently generating about 0.77 of returns per unit of risk over similar time horizon. If you would invest  1,003  in Global X on September 12, 2024 and sell it today you would earn a total of  25.00  from holding Global X or generate 2.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.13%
Values	Daily Returns

Harding Loevner Frontier  vs.  Global X

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.

Global X

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Global X is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Harding Loevner and Global X

The main advantage of trading using opposite Harding Loevner and Global X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harding Loevner 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 Harding Loevner Frontier and Global X 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.