Correlation Between Royce Special and Hartford Capital

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

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

Diversification Opportunities for Royce Special and Hartford Capital

0.85

Correlation Coefficient

Royce Special  Hartford Capital

Very poor diversification

The 3 months correlation between Royce and Hartford is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Royce Special Equity and The Hartford Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Capital and Royce Special 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 Royce Special Equity are associated (or correlated) with Hartford Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Capital has no effect on the direction of Royce Special i.e., Royce Special and Hartford Capital go up and down completely randomly.

Pair Corralation between Royce Special and Hartford Capital

Assuming the 90 days horizon Royce Special Equity is expected to under-perform the Hartford Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Royce Special Equity is 1.1 times less risky than Hartford Capital. The mutual fund trades about -0.15 of its potential returns per unit of risk. The The Hartford Capital is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  5,556  in The Hartford Capital on December 30, 2024 and sell it today you would lose (396.00) from holding The Hartford Capital or give up 7.13% of portfolio value over 90 days.

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

Royce Special Equity  vs.  The Hartford Capital

Royce Special Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Special Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Hartford Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Hartford Capital has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Royce Special and Hartford Capital

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

The idea behind Royce Special Equity and The Hartford Capital 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.