Correlation Between Fixed Income and The Hartford

Can any of the company-specific risk be diversified away by investing in both Fixed Income 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 Fixed Income 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 Fixed Income and The Hartford Equity, you can compare the effects of market volatilities on Fixed Income 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 Fixed Income with a short position of The Hartford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fixed Income and The Hartford.

Diversification Opportunities for Fixed Income and The Hartford

0.77

Correlation Coefficient

Fixed Income  The Hartford

Poor diversification

The 3 months correlation between Fixed and The is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding The Fixed Income and The Hartford Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Equity and Fixed Income 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 Fixed Income 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 Equity has no effect on the direction of Fixed Income i.e., Fixed Income and The Hartford go up and down completely randomly.

Pair Corralation between Fixed Income and The Hartford

Assuming the 90 days horizon The Fixed Income is expected to under-perform the The Hartford. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Fixed Income is 2.26 times less risky than The Hartford. The mutual fund trades about -0.05 of its potential returns per unit of risk. The The Hartford Equity is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,085  in The Hartford Equity on December 27, 2024 and sell it today you would lose (10.00) from holding The Hartford Equity or give up 0.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

The Fixed Income  vs.  The Hartford Equity

Fixed Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Fixed Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fixed Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Equity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Equity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, The Hartford is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fixed Income and The Hartford

The main advantage of trading using opposite Fixed Income and The Hartford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fixed Income 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 Fixed Income 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.