Correlation Between Global Core and Stone Harbor

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

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

Diversification Opportunities for Global Core and Stone Harbor

0.09

Correlation Coefficient

Global Core  Stone Harbor

Significant diversification

The 3 months correlation between Global and Stone is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Global E Portfolio and Stone Harbor Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Harbor Emerging and Global Core 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 Global E Portfolio are associated (or correlated) with Stone Harbor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Harbor Emerging has no effect on the direction of Global Core i.e., Global Core and Stone Harbor go up and down completely randomly.

Pair Corralation between Global Core and Stone Harbor

Assuming the 90 days horizon Global E Portfolio is expected to under-perform the Stone Harbor. In addition to that, Global Core is 1.09 times more volatile than Stone Harbor Emerging. It trades about -0.04 of its total potential returns per unit of risk. Stone Harbor Emerging is currently generating about 0.16 per unit of volatility. If you would invest  455.00  in Stone Harbor Emerging on December 28, 2024 and sell it today you would earn a total of  48.00  from holding Stone Harbor Emerging or generate 10.55% return on investment over 90 days.

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

Global E Portfolio  vs.  Stone Harbor Emerging

Global E Portfolio

Risk-Adjusted Performance

Very Weak

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

Stone Harbor Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Harbor Emerging are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. Despite nearly inconsistent fundamental indicators, Stone Harbor may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global Core and Stone Harbor

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

The idea behind Global E Portfolio and Stone Harbor Emerging 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.