Correlation Between Fundamental Large and Hartford Small

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

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

Diversification Opportunities for Fundamental Large and Hartford Small

0.76

Correlation Coefficient

Fundamental Large  Hartford Small

Poor diversification

The 3 months correlation between Fundamental and Hartford is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and The Hartford Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Small and Fundamental Large 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 Fundamental Large Cap 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 has no effect on the direction of Fundamental Large i.e., Fundamental Large and Hartford Small go up and down completely randomly.

Pair Corralation between Fundamental Large and Hartford Small

Assuming the 90 days horizon Fundamental Large is expected to generate 1.13 times less return on investment than Hartford Small. But when comparing it to its historical volatility, Fundamental Large Cap is 1.62 times less risky than Hartford Small. It trades about 0.21 of its potential returns per unit of risk. The Hartford Small is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,803  in The Hartford Small on September 12, 2024 and sell it today you would earn a total of  290.00  from holding The Hartford Small or generate 10.35% return on investment over 90 days.

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

Fundamental Large Cap  vs.  The Hartford Small

Fundamental Large Cap

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Large Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fundamental Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hartford Small

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Small are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hartford Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fundamental Large and Hartford Small

The main advantage of trading using opposite Fundamental Large and Hartford Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundamental Large 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 Fundamental Large Cap and The Hartford Small 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.