Correlation Between Royce Special and The Hartford

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

Diversification Opportunities for Royce Special and The Hartford

0.23

Correlation Coefficient

Royce Special  The Hartford

Modest diversification

The 3 months correlation between Royce and The is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Royce Special Equity and The Hartford Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Dividend 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 The Hartford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Dividend has no effect on the direction of Royce Special i.e., Royce Special and The Hartford go up and down completely randomly.

Pair Corralation between Royce Special and The Hartford

Assuming the 90 days horizon Royce Special Equity is expected to under-perform the The Hartford. In addition to that, Royce Special is 1.3 times more volatile than The Hartford Dividend. It trades about -0.13 of its total potential returns per unit of risk. The Hartford Dividend is currently generating about 0.03 per unit of volatility. If you would invest  3,448  in The Hartford Dividend on December 28, 2024 and sell it today you would earn a total of  36.00  from holding The Hartford Dividend or generate 1.04% return on investment over 90 days.

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

Royce Special Equity  vs.  The Hartford Dividend

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 Dividend

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Dividend are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, The Hartford is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royce Special and The Hartford

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

The idea behind Royce Special Equity and The Hartford Dividend 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..