Correlation Between The Hartford and Chestnut Street

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

By analyzing existing cross correlation between The Hartford Small and Chestnut Street Exchange, you can compare the effects of market volatilities on The Hartford and Chestnut Street 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 Chestnut Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Hartford and Chestnut Street.

Diversification Opportunities for The Hartford and Chestnut Street

0.93

Correlation Coefficient

The Hartford  Chestnut Street

Almost no diversification

The 3 months correlation between The and Chestnut is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Small and Chestnut Street Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chestnut Street Exchange 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 Small are associated (or correlated) with Chestnut Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chestnut Street Exchange has no effect on the direction of The Hartford i.e., The Hartford and Chestnut Street go up and down completely randomly.

Pair Corralation between The Hartford and Chestnut Street

Assuming the 90 days horizon The Hartford Small is expected to generate 1.76 times more return on investment than Chestnut Street. However, The Hartford is 1.76 times more volatile than Chestnut Street Exchange. It trades about 0.17 of its potential returns per unit of risk. Chestnut Street Exchange is currently generating about 0.21 per unit of risk. If you would invest  2,801  in The Hartford Small on August 31, 2024 and sell it today you would earn a total of  338.00  from holding The Hartford Small or generate 12.07% 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 Small  vs.  Chestnut Street Exchange

Hartford Small

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Small are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, The Hartford may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Chestnut Street Exchange

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chestnut Street Exchange are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Chestnut Street may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with The Hartford and Chestnut Street

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

The idea behind The Hartford Small and Chestnut Street Exchange 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.