Correlation Between Mesirow Financial and Hartford Municipal

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

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

Diversification Opportunities for Mesirow Financial and Hartford Municipal

0.18

Correlation Coefficient

Mesirow Financial  Hartford Municipal

Average diversification

The 3 months correlation between Mesirow and Hartford is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial Small and Hartford Municipal Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Municipal Short and Mesirow Financial 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 Mesirow Financial Small are associated (or correlated) with Hartford Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Municipal Short has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and Hartford Municipal go up and down completely randomly.

Pair Corralation between Mesirow Financial and Hartford Municipal

Assuming the 90 days horizon Mesirow Financial Small is expected to generate 11.86 times more return on investment than Hartford Municipal. However, Mesirow Financial is 11.86 times more volatile than Hartford Municipal Short. It trades about 0.18 of its potential returns per unit of risk. Hartford Municipal Short is currently generating about 0.3 per unit of risk. If you would invest  1,265  in Mesirow Financial Small on October 26, 2024 and sell it today you would earn a total of  36.00  from holding Mesirow Financial Small or generate 2.85% return on investment over 90 days.

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

Mesirow Financial Small  vs.  Hartford Municipal Short

Mesirow Financial Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hartford Municipal Short

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Municipal Short are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Hartford Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mesirow Financial and Hartford Municipal

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

The idea behind Mesirow Financial Small and Hartford Municipal Short 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.