Correlation Between Vanguard Balanced and Harvest Balanced

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

By analyzing existing cross correlation between Vanguard Balanced Portfolio and Harvest Balanced Income, you can compare the effects of market volatilities on Vanguard Balanced and Harvest Balanced 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 Vanguard Balanced with a short position of Harvest Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Balanced and Harvest Balanced.

Diversification Opportunities for Vanguard Balanced and Harvest Balanced

0.74

Correlation Coefficient

Vanguard Balanced  Harvest Balanced

Poor diversification

The 3 months correlation between Vanguard and Harvest is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Balanced Portfolio and Harvest Balanced Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Balanced Income and Vanguard Balanced 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 Vanguard Balanced Portfolio are associated (or correlated) with Harvest Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Balanced Income has no effect on the direction of Vanguard Balanced i.e., Vanguard Balanced and Harvest Balanced go up and down completely randomly.

Pair Corralation between Vanguard Balanced and Harvest Balanced

Assuming the 90 days trading horizon Vanguard Balanced Portfolio is expected to under-perform the Harvest Balanced. In addition to that, Vanguard Balanced is 1.16 times more volatile than Harvest Balanced Income. It trades about -0.02 of its total potential returns per unit of risk. Harvest Balanced Income is currently generating about 0.11 per unit of volatility. If you would invest  2,402  in Harvest Balanced Income on December 2, 2024 and sell it today you would earn a total of  17.00  from holding Harvest Balanced Income or generate 0.71% return on investment over 90 days.

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

Vanguard Balanced Portfolio  vs.  Harvest Balanced Income

Vanguard Balanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Balanced Portfolio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vanguard Balanced is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Harvest Balanced Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Harvest Balanced Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Harvest Balanced is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Balanced and Harvest Balanced

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

The idea behind Vanguard Balanced Portfolio and Harvest Balanced Income 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.