Correlation Between Hartford Multifactor and Invesco SP

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

Diversification Opportunities for Hartford Multifactor and Invesco SP

0.76

Correlation Coefficient

Hartford Multifactor  Invesco SP

Poor diversification

The 3 months correlation between Hartford and Invesco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hartford Multifactor Equity and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of Hartford Multifactor i.e., Hartford Multifactor and Invesco SP go up and down completely randomly.

Pair Corralation between Hartford Multifactor and Invesco SP

Given the investment horizon of 90 days Hartford Multifactor Equity is expected to generate 0.67 times more return on investment than Invesco SP. However, Hartford Multifactor Equity is 1.5 times less risky than Invesco SP. It trades about -0.02 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about -0.08 per unit of risk. If you would invest  5,137  in Hartford Multifactor Equity on December 21, 2024 and sell it today you would lose (61.00) from holding Hartford Multifactor Equity or give up 1.19% of portfolio value over 90 days.

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

Hartford Multifactor Equity  vs.  Invesco SP SmallCap

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.

Invesco SP SmallCap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hartford Multifactor and Invesco SP

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

The idea behind Hartford Multifactor Equity and Invesco SP SmallCap 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.