Correlation Between HomeToGo and Hartford Financial

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

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

Diversification Opportunities for HomeToGo and Hartford Financial

0.2

Correlation Coefficient

HomeToGo  Hartford Financial

Modest diversification

The 3 months correlation between HomeToGo and Hartford is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding HomeToGo SE and The Hartford Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Hartford Financial and HomeToGo 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 HomeToGo SE are associated (or correlated) with Hartford Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Hartford Financial has no effect on the direction of HomeToGo i.e., HomeToGo and Hartford Financial go up and down completely randomly.

Pair Corralation between HomeToGo and Hartford Financial

Assuming the 90 days trading horizon HomeToGo SE is expected to generate 1.91 times more return on investment than Hartford Financial. However, HomeToGo is 1.91 times more volatile than The Hartford Financial. It trades about 0.03 of its potential returns per unit of risk. The Hartford Financial is currently generating about 0.02 per unit of risk. If you would invest  193.00  in HomeToGo SE on September 25, 2024 and sell it today you would earn a total of  4.00  from holding HomeToGo SE or generate 2.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

HomeToGo SE  vs.  The Hartford Financial

HomeToGo SE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HomeToGo SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, HomeToGo is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

The Hartford Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Hartford Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HomeToGo and Hartford Financial

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

The idea behind HomeToGo SE and The Hartford Financial 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.