Correlation Between IShares SP and Harbor Long

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

By analyzing existing cross correlation between iShares SP 500 and Harbor Long Term Growers, you can compare the effects of market volatilities on IShares SP and Harbor Long 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 IShares SP with a short position of Harbor Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Harbor Long.

Diversification Opportunities for IShares SP and Harbor Long

1.0

Correlation Coefficient

IShares SP  Harbor Long

No risk reduction

The 3 months correlation between IShares and Harbor is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Harbor Long Term Growers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Long Term and IShares SP 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 iShares SP 500 are associated (or correlated) with Harbor Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Long Term has no effect on the direction of IShares SP i.e., IShares SP and Harbor Long go up and down completely randomly.

Pair Corralation between IShares SP and Harbor Long

Considering the 90-day investment horizon iShares SP 500 is expected to generate 0.96 times more return on investment than Harbor Long. However, iShares SP 500 is 1.04 times less risky than Harbor Long. It trades about 0.2 of its potential returns per unit of risk. Harbor Long Term Growers is currently generating about 0.18 per unit of risk. If you would invest  9,024  in iShares SP 500 on September 3, 2024 and sell it today you would earn a total of  1,141  from holding iShares SP 500 or generate 12.64% return on investment over 90 days.

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

iShares SP 500  vs.  Harbor Long Term Growers

iShares SP 500

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, IShares SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Harbor Long Term

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Long Term Growers are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Harbor Long may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares SP and Harbor Long

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

The idea behind iShares SP 500 and Harbor Long Term Growers 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.