Correlation Between The Hartford and Hartford Small

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

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

Diversification Opportunities for The Hartford and Hartford Small

0.9

Correlation Coefficient

The Hartford  Hartford Small

Almost no diversification

The 3 months correlation between The and Hartford is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Growth and Hartford Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Small Cap and The Hartford 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 The Hartford Growth are associated (or correlated) with Hartford Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Small Cap has no effect on the direction of The Hartford i.e., The Hartford and Hartford Small go up and down completely randomly.

Pair Corralation between The Hartford and Hartford Small

Assuming the 90 days horizon The Hartford Growth is expected to generate 0.9 times more return on investment than Hartford Small. However, The Hartford Growth is 1.11 times less risky than Hartford Small. It trades about 0.2 of its potential returns per unit of risk. Hartford Small Cap is currently generating about 0.16 per unit of risk. If you would invest  5,664  in The Hartford Growth on August 31, 2024 and sell it today you would earn a total of  810.00  from holding The Hartford Growth or generate 14.3% return on investment over 90 days.

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

The Hartford Growth  vs.  Hartford Small Cap

Hartford Growth

Risk-Adjusted Performance

16 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, The Hartford showed solid returns over the last few months and may actually be approaching a breakup point.

Hartford Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Hartford Small may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with The Hartford and Hartford Small

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

The idea behind The Hartford Growth and Hartford Small Cap 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.