Correlation Between High Yield and Harbor International

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

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

Diversification Opportunities for High Yield and Harbor International

0.63

Correlation Coefficient

High Yield  Harbor International

Poor diversification

The 3 months correlation between High and Harbor is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Harbor International Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor International and High Yield 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 High Yield Municipal Fund are associated (or correlated) with Harbor International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor International has no effect on the direction of High Yield i.e., High Yield and Harbor International go up and down completely randomly.

Pair Corralation between High Yield and Harbor International

Assuming the 90 days horizon High Yield is expected to generate 1.03 times less return on investment than Harbor International. But when comparing it to its historical volatility, High Yield Municipal Fund is 3.48 times less risky than Harbor International. It trades about 0.29 of its potential returns per unit of risk. Harbor International Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,505  in Harbor International Fund on March 22, 2024 and sell it today you would earn a total of  119.00  from holding Harbor International Fund or generate 2.64% return on investment over 90 days.

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

High Yield Municipal Fund  vs.  Harbor International Fund

High Yield Municipal

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in High Yield Municipal Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, High Yield is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Harbor International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbor International Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Harbor International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with High Yield and Harbor International

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

The idea behind High Yield Municipal Fund and Harbor International Fund 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.