Correlation Between Midcap Fund and Hartford Small

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

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

Diversification Opportunities for Midcap Fund and Hartford Small

0.97

Correlation Coefficient

Midcap Fund  Hartford Small

Almost no diversification

The 3 months correlation between Midcap and Hartford is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Institutional and Hartford Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Small Pany and Midcap Fund 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 Midcap Fund Institutional 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 Pany has no effect on the direction of Midcap Fund i.e., Midcap Fund and Hartford Small go up and down completely randomly.

Pair Corralation between Midcap Fund and Hartford Small

Assuming the 90 days horizon Midcap Fund Institutional is expected to generate 0.74 times more return on investment than Hartford Small. However, Midcap Fund Institutional is 1.35 times less risky than Hartford Small. It trades about 0.09 of its potential returns per unit of risk. Hartford Small Pany is currently generating about 0.06 per unit of risk. If you would invest  3,673  in Midcap Fund Institutional on September 12, 2024 and sell it today you would earn a total of  1,147  from holding Midcap Fund Institutional or generate 31.23% return on investment over 90 days.

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

Midcap Fund Institutional  vs.  Hartford Small Pany

Midcap Fund Institutional

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Fund Institutional are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Midcap Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hartford Small Pany

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Small Pany are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hartford Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Midcap Fund and Hartford Small

The main advantage of trading using opposite Midcap Fund and Hartford Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Fund 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 Midcap Fund Institutional and Hartford Small Pany 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.