Correlation Between Delaware Healthcare and Hartford Municipal

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

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

Diversification Opportunities for Delaware Healthcare and Hartford Municipal

0.86

Correlation Coefficient

Delaware Healthcare  Hartford Municipal

Very poor diversification

The 3 months correlation between Delaware and Hartford is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Delaware Healthcare Fund and Hartford Municipal Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Municipal Short and Delaware Healthcare 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 Delaware Healthcare Fund are associated (or correlated) with Hartford Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Municipal Short has no effect on the direction of Delaware Healthcare i.e., Delaware Healthcare and Hartford Municipal go up and down completely randomly.

Pair Corralation between Delaware Healthcare and Hartford Municipal

Assuming the 90 days horizon Delaware Healthcare Fund is expected to generate 9.08 times more return on investment than Hartford Municipal. However, Delaware Healthcare is 9.08 times more volatile than Hartford Municipal Short. It trades about 0.08 of its potential returns per unit of risk. Hartford Municipal Short is currently generating about 0.23 per unit of risk. If you would invest  2,438  in Delaware Healthcare Fund on December 23, 2024 and sell it today you would earn a total of  60.00  from holding Delaware Healthcare Fund or generate 2.46% return on investment over 90 days.

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

Delaware Healthcare Fund  vs.  Hartford Municipal Short

Delaware Healthcare

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Delaware Healthcare Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Delaware Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Municipal Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Municipal Short are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Hartford Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Delaware Healthcare and Hartford Municipal

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

The idea behind Delaware Healthcare Fund and Hartford Municipal Short 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.