Correlation Between New World and Harding Loevner

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

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

Diversification Opportunities for New World and Harding Loevner

0.95

Correlation Coefficient

New World  Harding Loevner

Almost no diversification

The 3 months correlation between New and Harding is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund 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 New World 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 World Fund 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 New World i.e., New World and Harding Loevner go up and down completely randomly.

Pair Corralation between New World and Harding Loevner

Assuming the 90 days horizon New World Fund is expected to generate 0.77 times more return on investment than Harding Loevner. However, New World Fund is 1.29 times less risky than Harding Loevner. It trades about 0.07 of its potential returns per unit of risk. Harding Loevner Institutional is currently generating about 0.04 per unit of risk. If you would invest  7,372  in New World Fund on September 12, 2024 and sell it today you would earn a total of  895.00  from holding New World Fund or generate 12.14% return on investment over 90 days.

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

New World Fund  vs.  Harding Loevner Institutional

New World Fund

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New World Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, New World 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 technical and fundamental 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 New World and Harding Loevner

The main advantage of trading using opposite New World and Harding Loevner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World 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 New World Fund 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.