Correlation Between Two Harbors and Bancroft Fund

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

By analyzing existing cross correlation between Two Harbors Investments and Bancroft Fund Limited, you can compare the effects of market volatilities on Two Harbors and Bancroft Fund 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 Two Harbors with a short position of Bancroft Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Two Harbors and Bancroft Fund.

Diversification Opportunities for Two Harbors and Bancroft Fund

-0.8

Correlation Coefficient

Two Harbors  Bancroft Fund

Pay attention - limited upside

The 3 months correlation between Two and Bancroft is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Two Harbors Investments and Bancroft Fund Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancroft Fund Limited and Two Harbors 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 Two Harbors Investments are associated (or correlated) with Bancroft Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancroft Fund Limited has no effect on the direction of Two Harbors i.e., Two Harbors and Bancroft Fund go up and down completely randomly.

Pair Corralation between Two Harbors and Bancroft Fund

Considering the 90-day investment horizon Two Harbors Investments is expected to under-perform the Bancroft Fund. In addition to that, Two Harbors is 1.9 times more volatile than Bancroft Fund Limited. It trades about -0.17 of its total potential returns per unit of risk. Bancroft Fund Limited is currently generating about 0.37 per unit of volatility. If you would invest  1,564  in Bancroft Fund Limited on September 1, 2024 and sell it today you would earn a total of  275.00  from holding Bancroft Fund Limited or generate 17.58% return on investment over 90 days.

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

Two Harbors Investments  vs.  Bancroft Fund Limited

Two Harbors Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Two Harbors Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Bancroft Fund Limited

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bancroft Fund Limited are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Bancroft Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Two Harbors and Bancroft Fund

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

The idea behind Two Harbors Investments and Bancroft Fund Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.