Correlation Between Hartford Municipal and IShares Edge

Can any of the company-specific risk be diversified away by investing in both Hartford Municipal and IShares Edge 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 IShares Edge 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 iShares Edge Investment, you can compare the effects of market volatilities on Hartford Municipal and IShares Edge 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 IShares Edge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hartford Municipal and IShares Edge.

Diversification Opportunities for Hartford Municipal and IShares Edge

0.81

Correlation Coefficient

Hartford Municipal  IShares Edge

Very poor diversification

The 3 months correlation between Hartford and IShares is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Municipal Opportuniti and iShares Edge Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Edge Investment 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 IShares Edge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Edge Investment has no effect on the direction of Hartford Municipal i.e., Hartford Municipal and IShares Edge go up and down completely randomly.

Pair Corralation between Hartford Municipal and IShares Edge

Given the investment horizon of 90 days Hartford Municipal Opportunities is expected to generate 0.78 times more return on investment than IShares Edge. However, Hartford Municipal Opportunities is 1.28 times less risky than IShares Edge. It trades about -0.21 of its potential returns per unit of risk. iShares Edge Investment is currently generating about -0.39 per unit of risk. If you would invest  3,912  in Hartford Municipal Opportunities on October 9, 2024 and sell it today you would lose (38.00) from holding Hartford Municipal Opportunities or give up 0.97% of portfolio value over 90 days.

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

Hartford Municipal Opportuniti  vs.  iShares Edge Investment

Hartford Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Municipal Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

iShares Edge Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Edge Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, IShares Edge 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 Municipal and IShares Edge

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

The idea behind Hartford Municipal Opportunities and iShares Edge Investment 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.