Correlation Between Harbor Diversified and Investment Grade

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

By analyzing existing cross correlation between Harbor Diversified International and Investment Grade Bond, you can compare the effects of market volatilities on Harbor Diversified and Investment Grade 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 Harbor Diversified with a short position of Investment Grade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbor Diversified and Investment Grade.

Diversification Opportunities for Harbor Diversified and Investment Grade

0.56

Correlation Coefficient

Harbor Diversified  Investment Grade

Very weak diversification

The 3 months correlation between HARBOR and Investment is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Diversified Internation and Investment Grade Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Grade Bond and Harbor Diversified 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 Harbor Diversified International are associated (or correlated) with Investment Grade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Grade Bond has no effect on the direction of Harbor Diversified i.e., Harbor Diversified and Investment Grade go up and down completely randomly.

Pair Corralation between Harbor Diversified and Investment Grade

Assuming the 90 days horizon Harbor Diversified International is expected to generate 2.58 times more return on investment than Investment Grade. However, Harbor Diversified is 2.58 times more volatile than Investment Grade Bond. It trades about 0.0 of its potential returns per unit of risk. Investment Grade Bond is currently generating about -0.03 per unit of risk. If you would invest  1,292  in Harbor Diversified International on September 3, 2024 and sell it today you would lose (2.00) from holding Harbor Diversified International or give up 0.15% of portfolio value over 90 days.

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

Harbor Diversified Internation  vs.  Investment Grade Bond

Harbor Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbor Diversified International has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Harbor Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Investment Grade Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investment Grade Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Investment Grade is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Harbor Diversified and Investment Grade

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

The idea behind Harbor Diversified International and Investment Grade Bond 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.