Correlation Between Harbor Capital and Western Asset

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

By analyzing existing cross correlation between Harbor Capital Appreciation and Western Asset E, you can compare the effects of market volatilities on Harbor Capital and Western Asset 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 Capital with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbor Capital and Western Asset.

Diversification Opportunities for Harbor Capital and Western Asset

0.77

Correlation Coefficient

Harbor Capital  Western Asset

Poor diversification

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

Pair Corralation between Harbor Capital and Western Asset

Assuming the 90 days horizon Harbor Capital Appreciation is expected to generate 2.52 times more return on investment than Western Asset. However, Harbor Capital is 2.52 times more volatile than Western Asset E. It trades about 0.09 of its potential returns per unit of risk. Western Asset E is currently generating about 0.01 per unit of risk. If you would invest  6,850  in Harbor Capital Appreciation on October 25, 2024 and sell it today you would earn a total of  4,419  from holding Harbor Capital Appreciation or generate 64.51% return on investment over 90 days.

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

Harbor Capital Appreciation  vs.  Western Asset E

Harbor Capital Appre

Risk-Adjusted Performance

0 of 100

Very Weak

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

Western Asset E

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Harbor Capital and Western Asset

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

The idea behind Harbor Capital Appreciation and Western Asset E 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.