Correlation Between Harbor Mid and Harbor Large

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

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

Diversification Opportunities for Harbor Mid and Harbor Large

0.91

Correlation Coefficient

Harbor Mid  Harbor Large

Almost no diversification

The 3 months correlation between Harbor and Harbor is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Mid Cap and Harbor Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Large Cap and Harbor Mid 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 Mid Cap are associated (or correlated) with Harbor Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Large Cap has no effect on the direction of Harbor Mid i.e., Harbor Mid and Harbor Large go up and down completely randomly.

Pair Corralation between Harbor Mid and Harbor Large

Assuming the 90 days horizon Harbor Mid Cap is expected to generate 1.47 times more return on investment than Harbor Large. However, Harbor Mid is 1.47 times more volatile than Harbor Large Cap. It trades about 0.22 of its potential returns per unit of risk. Harbor Large Cap is currently generating about 0.13 per unit of risk. If you would invest  480.00  in Harbor Mid Cap on September 3, 2024 and sell it today you would earn a total of  73.00  from holding Harbor Mid Cap or generate 15.21% return on investment over 90 days.

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

Harbor Mid Cap  vs.  Harbor Large Cap

Harbor Mid Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Mid Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Harbor Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Harbor Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Harbor Large 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 Mid and Harbor Large

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

The idea behind Harbor Mid Cap and Harbor Large Cap 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..