Correlation Between Metropolitan West and The Hartford

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

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

Diversification Opportunities for Metropolitan West and The Hartford

-0.64

Correlation Coefficient

Metropolitan West  The Hartford

Excellent diversification

The 3 months correlation between Metropolitan and The is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Metropolitan West Total and The Hartford Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Midcap and Metropolitan West 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 Metropolitan West Total are associated (or correlated) with The Hartford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Midcap has no effect on the direction of Metropolitan West i.e., Metropolitan West and The Hartford go up and down completely randomly.

Pair Corralation between Metropolitan West and The Hartford

Assuming the 90 days horizon Metropolitan West Total is expected to under-perform the The Hartford. But the mutual fund apears to be less risky and, when comparing its historical volatility, Metropolitan West Total is 2.64 times less risky than The Hartford. The mutual fund trades about -0.05 of its potential returns per unit of risk. The The Hartford Midcap is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  2,705  in The Hartford Midcap on September 3, 2024 and sell it today you would earn a total of  367.00  from holding The Hartford Midcap or generate 13.57% return on investment over 90 days.

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

Metropolitan West Total  vs.  The Hartford Midcap

Metropolitan West Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan West Total has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Metropolitan West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Midcap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Midcap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, The Hartford showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Metropolitan West and The Hartford

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

The idea behind Metropolitan West Total and The Hartford Midcap 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.