Correlation Between The Hartford and Ultrashort Emerging

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

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

Diversification Opportunities for The Hartford and Ultrashort Emerging

-0.19

Correlation Coefficient

The Hartford  Ultrashort Emerging

Good diversification

The 3 months correlation between The and Ultrashort is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Municipal and Ultrashort Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Emerging 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 Municipal are associated (or correlated) with Ultrashort Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Emerging has no effect on the direction of The Hartford i.e., The Hartford and Ultrashort Emerging go up and down completely randomly.

Pair Corralation between The Hartford and Ultrashort Emerging

Assuming the 90 days horizon The Hartford is expected to generate 2.8 times less return on investment than Ultrashort Emerging. But when comparing it to its historical volatility, The Hartford Municipal is 14.71 times less risky than Ultrashort Emerging. It trades about 0.05 of its potential returns per unit of risk. Ultrashort Emerging Markets is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,384  in Ultrashort Emerging Markets on October 8, 2024 and sell it today you would lose (22.00) from holding Ultrashort Emerging Markets or give up 1.59% of portfolio value over 90 days.

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

The Hartford Municipal  vs.  Ultrashort Emerging Markets

The Hartford Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ultrashort Emerging

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Emerging Markets are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrashort Emerging showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with The Hartford and Ultrashort Emerging

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

The idea behind The Hartford Municipal and Ultrashort Emerging Markets 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.