Correlation Between Small Company and Harbor International

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

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

Diversification Opportunities for Small Company and Harbor International

-0.83

Correlation Coefficient

Small Company  Harbor International

Pay attention - limited upside

The 3 months correlation between Small and Harbor is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Harbor International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor International and Small Company 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 Small Pany Growth 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 Small Company i.e., Small Company and Harbor International go up and down completely randomly.

Pair Corralation between Small Company and Harbor International

Assuming the 90 days horizon Small Pany Growth is expected to generate 2.03 times more return on investment than Harbor International. However, Small Company is 2.03 times more volatile than Harbor International Small. It trades about 0.36 of its potential returns per unit of risk. Harbor International Small is currently generating about -0.08 per unit of risk. If you would invest  1,120  in Small Pany Growth on September 3, 2024 and sell it today you would earn a total of  549.00  from holding Small Pany Growth or generate 49.02% return on investment over 90 days.

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

Small Pany Growth  vs.  Harbor International Small

Small Pany Growth

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Small Company showed solid returns over the last few months and may actually be approaching a breakup point.

Harbor International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbor International Small has generated negative risk-adjusted returns adding no value to fund investors. 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 Small Company and Harbor International

The main advantage of trading using opposite Small Company and Harbor International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Company 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 Small Pany Growth 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.