Correlation Between Royce Opportunity and Hartford Small

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

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

Diversification Opportunities for Royce Opportunity and Hartford Small

0.96

Correlation Coefficient

Royce Opportunity  Hartford Small

Almost no diversification

The 3 months correlation between Royce and Hartford is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Royce Opportunity Fund and Hartford Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Small Cap and Royce Opportunity 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 Opportunity Fund are associated (or correlated) with Hartford Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Small Cap has no effect on the direction of Royce Opportunity i.e., Royce Opportunity and Hartford Small go up and down completely randomly.

Pair Corralation between Royce Opportunity and Hartford Small

Assuming the 90 days horizon Royce Opportunity Fund is expected to under-perform the Hartford Small. In addition to that, Royce Opportunity is 1.32 times more volatile than Hartford Small Cap. It trades about -0.11 of its total potential returns per unit of risk. Hartford Small Cap is currently generating about -0.12 per unit of volatility. If you would invest  1,343  in Hartford Small Cap on December 22, 2024 and sell it today you would lose (97.00) from holding Hartford Small Cap or give up 7.22% of portfolio value over 90 days.

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

Royce Opportunity Fund  vs.  Hartford Small Cap

Royce Opportunity

Risk-Adjusted Performance

Very Weak

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

Hartford Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hartford Small Cap 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 Opportunity and Hartford Small

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

The idea behind Royce Opportunity Fund and Hartford Small Cap 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.