Correlation Between The Hartford and Health Care

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

By analyzing existing cross correlation between The Hartford Healthcare and Health Care Ultrasector, you can compare the effects of market volatilities on The Hartford and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Hartford and Health Care.

Diversification Opportunities for The Hartford and Health Care

0.98

Correlation Coefficient

The Hartford  Health Care

Almost no diversification

The 3 months correlation between The and Health is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Healthcare and Health Care Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Ultrasector 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 Healthcare are associated (or correlated) with Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Ultrasector has no effect on the direction of The Hartford i.e., The Hartford and Health Care go up and down completely randomly.

Pair Corralation between The Hartford and Health Care

Assuming the 90 days horizon The Hartford is expected to generate 1.71 times less return on investment than Health Care. But when comparing it to its historical volatility, The Hartford Healthcare is 1.32 times less risky than Health Care. It trades about 0.17 of its potential returns per unit of risk. Health Care Ultrasector is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  10,020  in Health Care Ultrasector on October 27, 2024 and sell it today you would earn a total of  483.00  from holding Health Care Ultrasector or generate 4.82% return on investment over 90 days.

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

The Hartford Healthcare  vs.  Health Care Ultrasector

The Hartford Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Hartford Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Health Care Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with The Hartford and Health Care

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

The idea behind The Hartford Healthcare and Health Care Ultrasector 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..