Correlation Between Regional Bank and Harding Loevner

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

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

Diversification Opportunities for Regional Bank and Harding Loevner

-0.74

Correlation Coefficient

Regional Bank  Harding Loevner

Pay attention - limited upside

The 3 months correlation between Regional and Harding is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and Harding Loevner Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Funds and Regional Bank 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 Regional Bank 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 Funds has no effect on the direction of Regional Bank i.e., Regional Bank and Harding Loevner go up and down completely randomly.

Pair Corralation between Regional Bank and Harding Loevner

Assuming the 90 days horizon Regional Bank Fund is expected to generate 2.47 times more return on investment than Harding Loevner. However, Regional Bank is 2.47 times more volatile than Harding Loevner Funds. It trades about 0.14 of its potential returns per unit of risk. Harding Loevner Funds is currently generating about -0.04 per unit of risk. If you would invest  2,847  in Regional Bank Fund on September 4, 2024 and sell it today you would earn a total of  538.00  from holding Regional Bank Fund or generate 18.9% return on investment over 90 days.

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

Regional Bank Fund  vs.  Harding Loevner Funds

Regional Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Bank Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Regional Bank showed solid returns over the last few months and may actually be approaching a breakup point.

Harding Loevner Funds

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harding Loevner Funds has generated negative risk-adjusted returns adding no value to fund investors. 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 Regional Bank and Harding Loevner

The main advantage of trading using opposite Regional Bank and Harding Loevner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Bank 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 Regional Bank Fund and Harding Loevner Funds 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.