Correlation Between Small Pany and Hartford Small

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

By analyzing existing cross correlation between Small Pany Growth and Hartford Small Cap, you can compare the effects of market volatilities on Small Pany and Hartford Small 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 Small Pany with a short position of Hartford Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Pany and Hartford Small.

Diversification Opportunities for Small Pany and Hartford Small

0.62

Correlation Coefficient

Small Pany  Hartford Small

Poor diversification

The 3 months correlation between Small and Hartford is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Hartford Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Small Cap and Small Pany 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 Small Pany Growth are associated (or correlated) with Hartford Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Small Cap has no effect on the direction of Small Pany i.e., Small Pany and Hartford Small go up and down completely randomly.

Pair Corralation between Small Pany and Hartford Small

Assuming the 90 days horizon Small Pany Growth is expected to under-perform the Hartford Small. In addition to that, Small Pany is 1.64 times more volatile than Hartford Small Cap. It trades about -0.14 of its total potential returns per unit of risk. Hartford Small Cap is currently generating about -0.19 per unit of volatility. If you would invest  3,110  in Hartford Small Cap on October 8, 2024 and sell it today you would lose (150.00) from holding Hartford Small Cap or give up 4.82% of portfolio value over 90 days.

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

Small Pany Growth  vs.  Hartford Small Cap

Small Pany Growth

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Small Pany showed solid returns over the last few months and may actually be approaching a breakup point.

Hartford Small Cap

Risk-Adjusted Performance

2 of 100

Insignificant

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

Pair Trading with Small Pany and Hartford Small

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

The idea behind Small Pany Growth and Hartford Small Cap 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.