Correlation Between Hartford Multifactor and Schwab Fundamental

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

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

Diversification Opportunities for Hartford Multifactor and Schwab Fundamental

-0.36

Correlation Coefficient

Hartford Multifactor  Schwab Fundamental

Very good diversification

The 3 months correlation between Hartford and Schwab is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Multifactor Developed and Schwab Fundamental Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Fundamental Small and Hartford Multifactor 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 Multifactor Developed are associated (or correlated) with Schwab Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Fundamental Small has no effect on the direction of Hartford Multifactor i.e., Hartford Multifactor and Schwab Fundamental go up and down completely randomly.

Pair Corralation between Hartford Multifactor and Schwab Fundamental

Given the investment horizon of 90 days Hartford Multifactor is expected to generate 29.55 times less return on investment than Schwab Fundamental. But when comparing it to its historical volatility, Hartford Multifactor Developed is 1.68 times less risky than Schwab Fundamental. It trades about 0.01 of its potential returns per unit of risk. Schwab Fundamental Small is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,849  in Schwab Fundamental Small on September 2, 2024 and sell it today you would earn a total of  373.00  from holding Schwab Fundamental Small or generate 13.09% return on investment over 90 days.

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

Hartford Multifactor Developed  vs.  Schwab Fundamental Small

Hartford Multifactor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Multifactor Developed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Hartford Multifactor is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Schwab Fundamental Small

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Schwab Fundamental Small are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Schwab Fundamental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hartford Multifactor and Schwab Fundamental

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

The idea behind Hartford Multifactor Developed and Schwab Fundamental 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..