Correlation Between The Fairholme and The Hartford

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

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

Diversification Opportunities for The Fairholme and The Hartford

0.77

Correlation Coefficient

The Fairholme  The Hartford

Poor diversification

The 3 months correlation between The and The is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Fairholme Focused and The Hartford Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Growth and The Fairholme 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 The Fairholme Focused are associated (or correlated) with The Hartford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Growth has no effect on the direction of The Fairholme i.e., The Fairholme and The Hartford go up and down completely randomly.

Pair Corralation between The Fairholme and The Hartford

Assuming the 90 days horizon The Fairholme Focused is expected to under-perform the The Hartford. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Fairholme Focused is 2.76 times less risky than The Hartford. The mutual fund trades about -0.17 of its potential returns per unit of risk. The The Hartford Growth is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,723  in The Hartford Growth on October 9, 2024 and sell it today you would earn a total of  52.00  from holding The Hartford Growth or generate 0.77% return on investment over 90 days.

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

The Fairholme Focused  vs.  The Hartford Growth

Fairholme Focused

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Fairholme Focused are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, The Fairholme is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Growth

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Growth are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, The Hartford may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with The Fairholme and The Hartford

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

The idea behind The Fairholme Focused and The Hartford Growth 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .