Correlation Between Hartford Total and Franklin Liberty

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

By analyzing existing cross correlation between Hartford Total Return and Franklin Liberty Low, you can compare the effects of market volatilities on Hartford Total and Franklin Liberty 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 Total with a short position of Franklin Liberty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hartford Total and Franklin Liberty.

Diversification Opportunities for Hartford Total and Franklin Liberty

-0.51

Correlation Coefficient

Hartford Total  Franklin Liberty

Excellent diversification

The 3 months correlation between Hartford and Franklin is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Total Return and Franklin Liberty Low in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Liberty Low and Hartford Total 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 Total Return are associated (or correlated) with Franklin Liberty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Liberty Low has no effect on the direction of Hartford Total i.e., Hartford Total and Franklin Liberty go up and down completely randomly.

Pair Corralation between Hartford Total and Franklin Liberty

Given the investment horizon of 90 days Hartford Total is expected to generate 4.76 times less return on investment than Franklin Liberty. But when comparing it to its historical volatility, Hartford Total Return is 1.58 times less risky than Franklin Liberty. It trades about 0.02 of its potential returns per unit of risk. Franklin Liberty Low is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,694  in Franklin Liberty Low on October 23, 2024 and sell it today you would earn a total of  897.00  from holding Franklin Liberty Low or generate 19.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.11%
Values	Daily Returns

Hartford Total Return  vs.  Franklin Liberty Low

Hartford Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Total Return has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hartford Total is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Franklin Liberty Low

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Liberty Low has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Franklin Liberty is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hartford Total and Franklin Liberty

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

The idea behind Hartford Total Return and Franklin Liberty Low 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.