Correlation Between The Hartford and Rational Defensive

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

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

Diversification Opportunities for The Hartford and Rational Defensive

0.96

Correlation Coefficient

The Hartford  Rational Defensive

Almost no diversification

The 3 months correlation between The and Rational is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Growth and Rational Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Defensive Growth 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 Growth are associated (or correlated) with Rational Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Defensive Growth has no effect on the direction of The Hartford i.e., The Hartford and Rational Defensive go up and down completely randomly.

Pair Corralation between The Hartford and Rational Defensive

Assuming the 90 days horizon The Hartford Growth is expected to generate 1.19 times more return on investment than Rational Defensive. However, The Hartford is 1.19 times more volatile than Rational Defensive Growth. It trades about 0.15 of its potential returns per unit of risk. Rational Defensive Growth is currently generating about 0.1 per unit of risk. If you would invest  6,272  in The Hartford Growth on October 9, 2024 and sell it today you would earn a total of  661.00  from holding The Hartford Growth or generate 10.54% 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 Growth  vs.  Rational Defensive Growth

Hartford Growth

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Growth are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, The Hartford may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Rational Defensive Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Rational Defensive 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 Rational Defensive

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

The idea behind The Hartford Growth and Rational Defensive 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.

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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 Anywhere module to track or share privately all of your investments from the convenience of any device.