Correlation Between Hartford Municipal and Capital Group

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

By analyzing existing cross correlation between Hartford Municipal Opportunities and Capital Group Core, you can compare the effects of market volatilities on Hartford Municipal and Capital Group 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 Municipal with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hartford Municipal and Capital Group.

Diversification Opportunities for Hartford Municipal and Capital Group

0.86

Correlation Coefficient

Hartford Municipal  Capital Group

Very poor diversification

The 3 months correlation between Hartford and Capital is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Municipal Opportuniti and Capital Group Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Core and Hartford Municipal 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 Municipal Opportunities are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Core has no effect on the direction of Hartford Municipal i.e., Hartford Municipal and Capital Group go up and down completely randomly.

Pair Corralation between Hartford Municipal and Capital Group

Given the investment horizon of 90 days Hartford Municipal is expected to generate 3.22 times less return on investment than Capital Group. But when comparing it to its historical volatility, Hartford Municipal Opportunities is 1.3 times less risky than Capital Group. It trades about 0.07 of its potential returns per unit of risk. Capital Group Core is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,197  in Capital Group Core on December 21, 2024 and sell it today you would earn a total of  59.00  from holding Capital Group Core or generate 2.69% return on investment over 90 days.

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

Hartford Municipal Opportuniti  vs.  Capital Group Core

Hartford Municipal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Municipal Opportunities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Hartford Municipal is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Capital Group Core

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Core are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Capital Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Hartford Municipal and Capital Group

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

The idea behind Hartford Municipal Opportunities and Capital Group Core 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.