Correlation Between Vanguard Developed and Harding Loevner

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

By analyzing existing cross correlation between Vanguard Developed Markets and Harding Loevner International, you can compare the effects of market volatilities on Vanguard Developed and Harding Loevner 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 Developed with a short position of Harding Loevner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Developed and Harding Loevner.

Diversification Opportunities for Vanguard Developed and Harding Loevner

0.99

Correlation Coefficient

Vanguard Developed  Harding Loevner

No risk reduction

The 3 months correlation between Vanguard and Harding is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Developed Markets and Harding Loevner International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Inte and Vanguard Developed 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 Developed Markets are associated (or correlated) with Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Inte has no effect on the direction of Vanguard Developed i.e., Vanguard Developed and Harding Loevner go up and down completely randomly.

Pair Corralation between Vanguard Developed and Harding Loevner

Assuming the 90 days horizon Vanguard Developed is expected to generate 1.0 times less return on investment than Harding Loevner. But when comparing it to its historical volatility, Vanguard Developed Markets is 1.0 times less risky than Harding Loevner. It trades about 0.13 of its potential returns per unit of risk. Harding Loevner International is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,292  in Harding Loevner International on December 30, 2024 and sell it today you would earn a total of  93.00  from holding Harding Loevner International or generate 7.2% return on investment over 90 days.

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

Vanguard Developed Markets  vs.  Harding Loevner International

Vanguard Developed

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Developed Markets are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Developed may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Harding Loevner Inte

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harding Loevner International are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Harding Loevner may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Vanguard Developed and Harding Loevner

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

The idea behind Vanguard Developed Markets and Harding Loevner International 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.