Correlation Between New Germany and Stone Harbor

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

By analyzing existing cross correlation between New Germany Closed and Stone Harbor Emerging, you can compare the effects of market volatilities on New Germany and Stone Harbor 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 New Germany with a short position of Stone Harbor. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Germany and Stone Harbor.

Diversification Opportunities for New Germany and Stone Harbor

0.35

Correlation Coefficient

New Germany  Stone Harbor

Weak diversification

The 3 months correlation between New and Stone is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding New Germany Closed and Stone Harbor Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Harbor Emerging and New Germany 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 New Germany Closed are associated (or correlated) with Stone Harbor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Harbor Emerging has no effect on the direction of New Germany i.e., New Germany and Stone Harbor go up and down completely randomly.

Pair Corralation between New Germany and Stone Harbor

Allowing for the 90-day total investment horizon New Germany Closed is expected to under-perform the Stone Harbor. In addition to that, New Germany is 1.02 times more volatile than Stone Harbor Emerging. It trades about -0.14 of its total potential returns per unit of risk. Stone Harbor Emerging is currently generating about -0.05 per unit of volatility. If you would invest  509.00  in Stone Harbor Emerging on September 1, 2024 and sell it today you would lose (7.00) from holding Stone Harbor Emerging or give up 1.38% of portfolio value over 90 days.

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

New Germany Closed  vs.  Stone Harbor Emerging

New Germany Closed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Germany Closed has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable technical and fundamental indicators, New Germany is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Stone Harbor Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stone Harbor Emerging has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable fundamental indicators, Stone Harbor is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with New Germany and Stone Harbor

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

The idea behind New Germany Closed and Stone Harbor Emerging 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.