Correlation Between The Hartford and Aberdeen

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

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

Diversification Opportunities for The Hartford and Aberdeen

-0.25

Correlation Coefficient

The Hartford  Aberdeen

Very good diversification

The 3 months correlation between The and Aberdeen is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Midcap and Aberdeen Eq Long Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Eq Long and The Hartford 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 Hartford Midcap are associated (or correlated) with Aberdeen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Eq Long has no effect on the direction of The Hartford i.e., The Hartford and Aberdeen go up and down completely randomly.

Pair Corralation between The Hartford and Aberdeen

Assuming the 90 days horizon The Hartford Midcap is expected to under-perform the Aberdeen. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Hartford Midcap is 20.42 times less risky than Aberdeen. The mutual fund trades about -0.17 of its potential returns per unit of risk. The Aberdeen Eq Long Short is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  963.00  in Aberdeen Eq Long Short on November 29, 2024 and sell it today you would earn a total of  1,991  from holding Aberdeen Eq Long Short or generate 206.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.22%
Values	Daily Returns

The Hartford Midcap  vs.  Aberdeen Eq Long Short

Hartford Midcap

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Hartford Midcap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Aberdeen Eq Long

Risk-Adjusted Performance

OK

Over the last 90 days Aberdeen Eq Long Short has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak forward indicators, Aberdeen showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with The Hartford and Aberdeen

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

The idea behind The Hartford Midcap and Aberdeen Eq Long 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.

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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.