Can any of the company-specific risk be diversified away by investing in both Harbor Mid and Meridian Contrarian 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 Harbor Mid and Meridian Contrarian into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Harbor Mid Cap and Meridian Trarian Fund, you can compare the effects of market volatilities on Harbor Mid and Meridian Contrarian 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 Harbor Mid with a short position of Meridian Contrarian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbor Mid and Meridian Contrarian.
Diversification Opportunities for Harbor Mid and Meridian Contrarian
The 3 months correlation between Harbor and Meridian is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Mid Cap and Meridian Trarian Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Contrarian and Harbor Mid 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 Harbor Mid Cap are associated (or correlated) with Meridian Contrarian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Contrarian has no effect on the direction of Harbor Mid i.e., Harbor Mid and Meridian Contrarian go up and down completely randomly.
Pair Corralation between Harbor Mid and Meridian Contrarian
Assuming the 90 days horizon Harbor Mid Cap is expected to under-perform the Meridian Contrarian. In addition to that, Harbor Mid is 1.09 times more volatile than Meridian Trarian Fund. It trades about -0.18 of its total potential returns per unit of risk. Meridian Trarian Fund is currently generating about 0.0 per unit of volatility. If you would invest 3,572 in Meridian Trarian Fund on March 6, 2024 and sell it today you would lose (2.00) from holding Meridian Trarian Fund or give up 0.06% of portfolio value over 90 days.
Over the last 90 days Harbor Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
Over the last 90 days Meridian Trarian Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Meridian Contrarian is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.