Correlation Between Inflation Protected and Harbor International

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

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

Diversification Opportunities for Inflation Protected and Harbor International

0.81

Correlation Coefficient

Inflation Protected  Harbor International

Very poor diversification

The 3 months correlation between Inflation and Harbor is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protected Bond Fund and Harbor International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor International and Inflation Protected 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 Inflation Protected Bond Fund are associated (or correlated) with Harbor International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor International has no effect on the direction of Inflation Protected i.e., Inflation Protected and Harbor International go up and down completely randomly.

Pair Corralation between Inflation Protected and Harbor International

Assuming the 90 days horizon Inflation Protected Bond Fund is expected to under-perform the Harbor International. But the mutual fund apears to be less risky and, when comparing its historical volatility, Inflation Protected Bond Fund is 1.59 times less risky than Harbor International. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Harbor International Small is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,429  in Harbor International Small on November 29, 2024 and sell it today you would earn a total of  29.00  from holding Harbor International Small or generate 2.03% return on investment over 90 days.

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

Inflation Protected Bond Fund  vs.  Harbor International Small

Inflation Protected

Risk-Adjusted Performance

Very Weak

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

Harbor International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor International Small are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Harbor International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Inflation Protected and Harbor International

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

The idea behind Inflation Protected Bond Fund and Harbor International Small 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.