Correlation Between Highland Floating and Harding Loevner

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

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

Diversification Opportunities for Highland Floating and Harding Loevner

0.61

Correlation Coefficient

Highland Floating  Harding Loevner

Poor diversification

The 3 months correlation between Highland and Harding is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Highland Floating Rate and Harding Loevner Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Inst and Highland Floating 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 Highland Floating Rate 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 Inst has no effect on the direction of Highland Floating i.e., Highland Floating and Harding Loevner go up and down completely randomly.

Pair Corralation between Highland Floating and Harding Loevner

Assuming the 90 days horizon Highland Floating Rate is expected to under-perform the Harding Loevner. But the mutual fund apears to be less risky and, when comparing its historical volatility, Highland Floating Rate is 2.06 times less risky than Harding Loevner. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Harding Loevner Institutional is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,933  in Harding Loevner Institutional on September 13, 2024 and sell it today you would earn a total of  47.00  from holding Harding Loevner Institutional or generate 2.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Highland Floating Rate  vs.  Harding Loevner Institutional

Highland Floating Rate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Harding Loevner Inst

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harding Loevner Institutional are ranked lower than 3 (%) 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 Highland Floating and Harding Loevner

The main advantage of trading using opposite Highland Floating and Harding Loevner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highland Floating 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 Highland Floating Rate and Harding Loevner Institutional 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.