Correlation Between Hartford Multifactor and RiverFront Dynamic

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

By analyzing existing cross correlation between Hartford Multifactor Equity and RiverFront Dynamic Core, you can compare the effects of market volatilities on Hartford Multifactor and RiverFront Dynamic 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 RiverFront Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hartford Multifactor and RiverFront Dynamic.

Diversification Opportunities for Hartford Multifactor and RiverFront Dynamic

0.69

Correlation Coefficient

Hartford Multifactor  RiverFront Dynamic

Poor diversification

The 3 months correlation between Hartford and RiverFront is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Multifactor Equity and RiverFront Dynamic Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverFront Dynamic Core 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 Equity are associated (or correlated) with RiverFront Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverFront Dynamic Core has no effect on the direction of Hartford Multifactor i.e., Hartford Multifactor and RiverFront Dynamic go up and down completely randomly.

Pair Corralation between Hartford Multifactor and RiverFront Dynamic

Given the investment horizon of 90 days Hartford Multifactor Equity is expected to under-perform the RiverFront Dynamic. In addition to that, Hartford Multifactor is 2.42 times more volatile than RiverFront Dynamic Core. It trades about -0.06 of its total potential returns per unit of risk. RiverFront Dynamic Core is currently generating about 0.32 per unit of volatility. If you would invest  2,224  in RiverFront Dynamic Core on December 3, 2024 and sell it today you would earn a total of  41.50  from holding RiverFront Dynamic Core or generate 1.87% return on investment over 90 days.

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

Hartford Multifactor Equity  vs.  RiverFront Dynamic Core

Hartford Multifactor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hartford Multifactor Equity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hartford Multifactor is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

RiverFront Dynamic Core

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RiverFront Dynamic Core are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, RiverFront Dynamic is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Hartford Multifactor and RiverFront Dynamic

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

The idea behind Hartford Multifactor Equity and RiverFront Dynamic Core 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.