Correlation Between Morningstar Defensive and Hartford Growth

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

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

Diversification Opportunities for Morningstar Defensive and Hartford Growth

-0.59

Correlation Coefficient

Morningstar Defensive  Hartford Growth

Excellent diversification

The 3 months correlation between Morningstar and Hartford is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Defensive Bond and The Hartford Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Growth and Morningstar Defensive 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 Morningstar Defensive Bond are associated (or correlated) with Hartford Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Growth has no effect on the direction of Morningstar Defensive i.e., Morningstar Defensive and Hartford Growth go up and down completely randomly.

Pair Corralation between Morningstar Defensive and Hartford Growth

Assuming the 90 days horizon Morningstar Defensive is expected to generate 7.6 times less return on investment than Hartford Growth. But when comparing it to its historical volatility, Morningstar Defensive Bond is 8.79 times less risky than Hartford Growth. It trades about 0.14 of its potential returns per unit of risk. The Hartford Growth is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,636  in The Hartford Growth on September 13, 2024 and sell it today you would earn a total of  2,052  from holding The Hartford Growth or generate 44.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Morningstar Defensive Bond  vs.  The Hartford Growth

Morningstar Defensive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morningstar Defensive Bond has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Morningstar Defensive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Growth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Hartford Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Morningstar Defensive and Hartford Growth

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

The idea behind Morningstar Defensive Bond and The Hartford Growth 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.