Correlation Between Global Stock and Hartford Equity

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

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

Diversification Opportunities for Global Stock and Hartford Equity

0.91

Correlation Coefficient

Global Stock  Hartford Equity

Almost no diversification

The 3 months correlation between Global and Hartford is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Global Stock Fund and The Hartford Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Equity and Global Stock 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 Global Stock Fund are associated (or correlated) with Hartford Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Equity has no effect on the direction of Global Stock i.e., Global Stock and Hartford Equity go up and down completely randomly.

Pair Corralation between Global Stock and Hartford Equity

Assuming the 90 days horizon Global Stock Fund is expected to generate 1.15 times more return on investment than Hartford Equity. However, Global Stock is 1.15 times more volatile than The Hartford Equity. It trades about -0.12 of its potential returns per unit of risk. The Hartford Equity is currently generating about -0.18 per unit of risk. If you would invest  2,301  in Global Stock Fund on September 27, 2024 and sell it today you would lose (185.00) from holding Global Stock Fund or give up 8.04% of portfolio value over 90 days.

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

Global Stock Fund  vs.  The Hartford Equity

Global Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Hartford Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Hartford Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Global Stock and Hartford Equity

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

The idea behind Global Stock Fund and The Hartford Equity 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.