Correlation Between Global Medical and Hartford Financial

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

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

Diversification Opportunities for Global Medical and Hartford Financial

0.18

Correlation Coefficient

Global Medical  Hartford Financial

Average diversification

The 3 months correlation between Global and Hartford is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Global Medical REIT and The Hartford Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Hartford Financial and Global Medical 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 Medical REIT 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 The Hartford Financial has no effect on the direction of Global Medical i.e., Global Medical and Hartford Financial go up and down completely randomly.

Pair Corralation between Global Medical and Hartford Financial

Assuming the 90 days trading horizon Global Medical REIT is expected to under-perform the Hartford Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, Global Medical REIT is 1.21 times less risky than Hartford Financial. The preferred stock trades about -0.22 of its potential returns per unit of risk. The The Hartford Financial is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,514  in The Hartford Financial on September 24, 2024 and sell it today you would earn a total of  3.00  from holding The Hartford Financial or generate 0.12% return on investment over 90 days.

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

Global Medical REIT  vs.  The Hartford Financial

Global Medical REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Medical REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Global Medical is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

The Hartford Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Hartford Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Global Medical and Hartford Financial

The main advantage of trading using opposite Global Medical and Hartford Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Medical 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 Global Medical REIT and The Hartford Financial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.