Correlation Between Hartford Multifactor and American Century

Can any of the company-specific risk be diversified away by investing in both Hartford Multifactor and American Century 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 American Century 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 American Century STOXX, you can compare the effects of market volatilities on Hartford Multifactor and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hartford Multifactor and American Century.

Diversification Opportunities for Hartford Multifactor and American Century

0.97

Correlation Coefficient

Hartford Multifactor  American Century

Almost no diversification

The 3 months correlation between Hartford and American is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Multifactor Equity and American Century STOXX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century STOXX 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century STOXX has no effect on the direction of Hartford Multifactor i.e., Hartford Multifactor and American Century go up and down completely randomly.

Pair Corralation between Hartford Multifactor and American Century

Given the investment horizon of 90 days Hartford Multifactor Equity is expected to generate 0.95 times more return on investment than American Century. However, Hartford Multifactor Equity is 1.05 times less risky than American Century. It trades about 0.09 of its potential returns per unit of risk. American Century STOXX is currently generating about 0.08 per unit of risk. If you would invest  3,856  in Hartford Multifactor Equity on October 21, 2024 and sell it today you would earn a total of  1,382  from holding Hartford Multifactor Equity or generate 35.84% return on investment over 90 days.

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

Hartford Multifactor Equity  vs.  American Century STOXX

Hartford Multifactor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Multifactor Equity are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

American Century STOXX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Century STOXX has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, American Century is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Hartford Multifactor and American Century

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

The idea behind Hartford Multifactor Equity and American Century STOXX 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.