Correlation Between Avantis Small and Hartford Multifactor

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

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

Diversification Opportunities for Avantis Small and Hartford Multifactor

0.95

Correlation Coefficient

Avantis Small  Hartford Multifactor

Almost no diversification

The 3 months correlation between Avantis and Hartford is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap and Hartford Multifactor Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Multifactor and Avantis Small 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 Avantis Small Cap are associated (or correlated) with Hartford Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Multifactor has no effect on the direction of Avantis Small i.e., Avantis Small and Hartford Multifactor go up and down completely randomly.

Pair Corralation between Avantis Small and Hartford Multifactor

Given the investment horizon of 90 days Avantis Small Cap is expected to generate 0.98 times more return on investment than Hartford Multifactor. However, Avantis Small Cap is 1.02 times less risky than Hartford Multifactor. It trades about -0.15 of its potential returns per unit of risk. Hartford Multifactor Small is currently generating about -0.15 per unit of risk. If you would invest  10,596  in Avantis Small Cap on October 25, 2024 and sell it today you would lose (612.00) from holding Avantis Small Cap or give up 5.78% of portfolio value over 90 days.

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

Avantis Small Cap  vs.  Hartford Multifactor Small

Avantis Small Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Small Cap are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Avantis Small may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hartford Multifactor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Multifactor Small are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Hartford Multifactor is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Avantis Small and Hartford Multifactor

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

The idea behind Avantis Small Cap and Hartford Multifactor Small 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.