Correlation Between Harding Loevner and Africa Fund

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

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

Diversification Opportunities for Harding Loevner and Africa Fund

0.36

Correlation Coefficient

Harding Loevner  Africa Fund

Weak diversification

The 3 months correlation between Harding and Africa is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Harding Loevner Frontier and Africa Fund Africa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Africa Fund Africa and Harding Loevner 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 Harding Loevner Frontier are associated (or correlated) with Africa Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Africa Fund Africa has no effect on the direction of Harding Loevner i.e., Harding Loevner and Africa Fund go up and down completely randomly.

Pair Corralation between Harding Loevner and Africa Fund

Assuming the 90 days horizon Harding Loevner Frontier is expected to under-perform the Africa Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Harding Loevner Frontier is 1.94 times less risky than Africa Fund. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Africa Fund Africa is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  703.00  in Africa Fund Africa on February 8, 2024 and sell it today you would earn a total of  27.00  from holding Africa Fund Africa or generate 3.84% return on investment over 90 days.

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

Harding Loevner Frontier  vs.  Africa Fund Africa

Harding Loevner Frontier

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Harding Loevner Frontier are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Harding Loevner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Africa Fund Africa

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Africa Fund Africa are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Africa Fund may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Harding Loevner and Africa Fund

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

The idea behind Harding Loevner Frontier and Africa Fund Africa 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.