Correlation Between Small Capitalization and Hartford Healthcare

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

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

Diversification Opportunities for Small Capitalization and Hartford Healthcare

-0.52

Correlation Coefficient

Small Capitalization  Hartford Healthcare

Excellent diversification

The 3 months correlation between Small and Hartford is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Small Capitalization Portfolio and Hartford Healthcare Hls in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Healthcare Hls and Small Capitalization 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 Small Capitalization Portfolio are associated (or correlated) with Hartford Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Healthcare Hls has no effect on the direction of Small Capitalization i.e., Small Capitalization and Hartford Healthcare go up and down completely randomly.

Pair Corralation between Small Capitalization and Hartford Healthcare

Assuming the 90 days horizon Small Capitalization Portfolio is expected to generate 2.2 times more return on investment than Hartford Healthcare. However, Small Capitalization is 2.2 times more volatile than Hartford Healthcare Hls. It trades about -0.02 of its potential returns per unit of risk. Hartford Healthcare Hls is currently generating about -0.2 per unit of risk. If you would invest  775.00  in Small Capitalization Portfolio on September 14, 2024 and sell it today you would lose (24.00) from holding Small Capitalization Portfolio or give up 3.1% of portfolio value over 90 days.

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

Small Capitalization Portfolio  vs.  Hartford Healthcare Hls

Small Capitalization

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Capitalization Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Small Capitalization is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Healthcare Hls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Healthcare Hls has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical 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 Small Capitalization and Hartford Healthcare

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

The idea behind Small Capitalization Portfolio and Hartford Healthcare Hls 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.

Check out your portfolio center.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.