Correlation Between Hartford Healthcare and Invesco Quality

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

By analyzing existing cross correlation between Hartford Healthcare Hls and Invesco Quality Income, you can compare the effects of market volatilities on Hartford Healthcare and Invesco Quality 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 Hartford Healthcare with a short position of Invesco Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hartford Healthcare and Invesco Quality.

Diversification Opportunities for Hartford Healthcare and Invesco Quality

0.04

Correlation Coefficient

Hartford Healthcare  Invesco Quality

Significant diversification

The 3 months correlation between Hartford and INVESCO is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Healthcare Hls and Invesco Quality Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Quality Income and Hartford Healthcare 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 Hartford Healthcare Hls are associated (or correlated) with Invesco Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Quality Income has no effect on the direction of Hartford Healthcare i.e., Hartford Healthcare and Invesco Quality go up and down completely randomly.

Pair Corralation between Hartford Healthcare and Invesco Quality

Assuming the 90 days horizon Hartford Healthcare is expected to generate 2.38 times less return on investment than Invesco Quality. In addition to that, Hartford Healthcare is 2.66 times more volatile than Invesco Quality Income. It trades about 0.03 of its total potential returns per unit of risk. Invesco Quality Income is currently generating about 0.18 per unit of volatility. If you would invest  942.00  in Invesco Quality Income on December 21, 2024 and sell it today you would earn a total of  32.00  from holding Invesco Quality Income or generate 3.4% return on investment over 90 days.

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

Hartford Healthcare Hls  vs.  Invesco Quality Income

Hartford Healthcare Hls

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Healthcare Hls are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical indicators, Hartford Healthcare is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Quality Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Quality Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Invesco Quality is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hartford Healthcare and Invesco Quality

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

The idea behind Hartford Healthcare Hls and Invesco Quality Income 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.