Correlation Between Global Stock and Harding Loevner

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

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

Diversification Opportunities for Global Stock and Harding Loevner

0.81

Correlation Coefficient

Global Stock  Harding Loevner

Very poor diversification

The 3 months correlation between Global and Harding is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Global Stock Fund and Harding Loevner Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Global and Global Stock 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 Stock Fund 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 Global has no effect on the direction of Global Stock i.e., Global Stock and Harding Loevner go up and down completely randomly.

Pair Corralation between Global Stock and Harding Loevner

Assuming the 90 days horizon Global Stock is expected to generate 1.57 times less return on investment than Harding Loevner. But when comparing it to its historical volatility, Global Stock Fund is 1.13 times less risky than Harding Loevner. It trades about 0.09 of its potential returns per unit of risk. Harding Loevner Global is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,343  in Harding Loevner Global on September 12, 2024 and sell it today you would earn a total of  239.00  from holding Harding Loevner Global or generate 5.5% return on investment over 90 days.

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

Global Stock Fund  vs.  Harding Loevner Global

Global Stock

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Global Stock Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Stock is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Harding Loevner Global

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harding Loevner Global are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Harding Loevner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Stock and Harding Loevner

The main advantage of trading using opposite Global Stock and Harding Loevner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Stock 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 Global Stock Fund and Harding Loevner Global 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.