Correlation Between DEUTSCHE MID and Hartford Sustainable

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

By analyzing existing cross correlation between DEUTSCHE MID CAP and Hartford Sustainable Income, you can compare the effects of market volatilities on DEUTSCHE MID and Hartford Sustainable 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 DEUTSCHE MID with a short position of Hartford Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of DEUTSCHE MID and Hartford Sustainable.

Diversification Opportunities for DEUTSCHE MID and Hartford Sustainable

0.63

Correlation Coefficient

DEUTSCHE MID  Hartford Sustainable

Poor diversification

The 3 months correlation between DEUTSCHE and Hartford is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding DEUTSCHE MID CAP and Hartford Sustainable Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Sustainable and DEUTSCHE MID 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 DEUTSCHE MID CAP are associated (or correlated) with Hartford Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Sustainable has no effect on the direction of DEUTSCHE MID i.e., DEUTSCHE MID and Hartford Sustainable go up and down completely randomly.

Pair Corralation between DEUTSCHE MID and Hartford Sustainable

Assuming the 90 days horizon DEUTSCHE MID CAP is expected to generate 0.82 times more return on investment than Hartford Sustainable. However, DEUTSCHE MID CAP is 1.22 times less risky than Hartford Sustainable. It trades about 0.15 of its potential returns per unit of risk. Hartford Sustainable Income is currently generating about 0.08 per unit of risk. If you would invest  908.00  in DEUTSCHE MID CAP on September 1, 2024 and sell it today you would earn a total of  15.00  from holding DEUTSCHE MID CAP or generate 1.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

DEUTSCHE MID CAP  vs.  Hartford Sustainable Income

DEUTSCHE MID CAP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DEUTSCHE MID CAP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, DEUTSCHE MID is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Sustainable

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Sustainable Income are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Hartford Sustainable is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with DEUTSCHE MID and Hartford Sustainable

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

The idea behind DEUTSCHE MID CAP and Hartford Sustainable Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.