Correlation Between Nasdaq and Hartford Small

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

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

Diversification Opportunities for Nasdaq and Hartford Small

0.59

Correlation Coefficient

Nasdaq  Hartford Small

Very weak diversification

The 3 months correlation between Nasdaq and Hartford is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and The Hartford Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Small and Nasdaq 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 Nasdaq Inc 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 has no effect on the direction of Nasdaq i.e., Nasdaq and Hartford Small go up and down completely randomly.

Pair Corralation between Nasdaq and Hartford Small

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.97 times more return on investment than Hartford Small. However, Nasdaq Inc is 1.03 times less risky than Hartford Small. It trades about 0.04 of its potential returns per unit of risk. The Hartford Small is currently generating about -0.22 per unit of risk. If you would invest  8,192  in Nasdaq Inc on December 3, 2024 and sell it today you would earn a total of  76.00  from holding Nasdaq Inc or generate 0.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Nasdaq Inc  vs.  The Hartford Small

Nasdaq Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Hartford Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Hartford Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Nasdaq and Hartford Small

The main advantage of trading using opposite Nasdaq and Hartford Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc and The Hartford Small 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.