Correlation Between Enact Holdings and Hartford Financial

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

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

Diversification Opportunities for Enact Holdings and Hartford Financial

0.43

Correlation Coefficient

Enact Holdings  Hartford Financial

Very weak diversification

The 3 months correlation between Enact and Hartford is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Enact Holdings and Hartford Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Financial and Enact Holdings 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 Enact Holdings 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 Hartford Financial has no effect on the direction of Enact Holdings i.e., Enact Holdings and Hartford Financial go up and down completely randomly.

Pair Corralation between Enact Holdings and Hartford Financial

Considering the 90-day investment horizon Enact Holdings is expected to generate 0.79 times more return on investment than Hartford Financial. However, Enact Holdings is 1.27 times less risky than Hartford Financial. It trades about 0.0 of its potential returns per unit of risk. Hartford Financial Services is currently generating about -0.3 per unit of risk. If you would invest  3,394  in Enact Holdings on September 20, 2024 and sell it today you would lose (2.00) from holding Enact Holdings or give up 0.06% of portfolio value over 90 days.

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

Enact Holdings  vs.  Hartford Financial Services

Enact Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enact Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Enact Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Hartford Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Enact Holdings and Hartford Financial

The main advantage of trading using opposite Enact Holdings and Hartford Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enact Holdings 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 Enact Holdings and Hartford Financial Services 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.