Correlation Between Vanguard Small and Harbor Scientific

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

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

Diversification Opportunities for Vanguard Small and Harbor Scientific

-0.32

Correlation Coefficient

Vanguard Small  Harbor Scientific

Very good diversification

The 3 months correlation between Vanguard and Harbor is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and Harbor Scientific Alpha in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Scientific Alpha and Vanguard Small 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 Vanguard Small Cap Growth are associated (or correlated) with Harbor Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Scientific Alpha has no effect on the direction of Vanguard Small i.e., Vanguard Small and Harbor Scientific go up and down completely randomly.

Pair Corralation between Vanguard Small and Harbor Scientific

Considering the 90-day investment horizon Vanguard Small Cap Growth is expected to generate 5.08 times more return on investment than Harbor Scientific. However, Vanguard Small is 5.08 times more volatile than Harbor Scientific Alpha. It trades about 0.21 of its potential returns per unit of risk. Harbor Scientific Alpha is currently generating about 0.05 per unit of risk. If you would invest  26,110  in Vanguard Small Cap Growth on August 30, 2024 and sell it today you would earn a total of  3,913  from holding Vanguard Small Cap Growth or generate 14.99% return on investment over 90 days.

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

Vanguard Small Cap Growth  vs.  Harbor Scientific Alpha

Vanguard Small Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Small Cap Growth are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental drivers, Vanguard Small disclosed solid returns over the last few months and may actually be approaching a breakup point.

Harbor Scientific Alpha

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Scientific Alpha are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Harbor Scientific is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Vanguard Small and Harbor Scientific

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

The idea behind Vanguard Small Cap Growth and Harbor Scientific Alpha 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 Stocks Directory module to find actively traded stocks across global markets.