Correlation Between FlexShares Morningstar and Hartford Multifactor

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

By analyzing existing cross correlation between FlexShares Morningstar Emerging and Hartford Multifactor Emerging, you can compare the effects of market volatilities on FlexShares Morningstar and Hartford Multifactor 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 FlexShares Morningstar with a short position of Hartford Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of FlexShares Morningstar and Hartford Multifactor.

Diversification Opportunities for FlexShares Morningstar and Hartford Multifactor

0.91

Correlation Coefficient

FlexShares Morningstar  Hartford Multifactor

Almost no diversification

The 3 months correlation between FlexShares and Hartford is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares Morningstar Emergin and Hartford Multifactor Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Multifactor and FlexShares Morningstar 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 FlexShares Morningstar Emerging are associated (or correlated) with Hartford Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Multifactor has no effect on the direction of FlexShares Morningstar i.e., FlexShares Morningstar and Hartford Multifactor go up and down completely randomly.

Pair Corralation between FlexShares Morningstar and Hartford Multifactor

Given the investment horizon of 90 days FlexShares Morningstar Emerging is expected to generate 1.22 times more return on investment than Hartford Multifactor. However, FlexShares Morningstar is 1.22 times more volatile than Hartford Multifactor Emerging. It trades about 0.02 of its potential returns per unit of risk. Hartford Multifactor Emerging is currently generating about -0.02 per unit of risk. If you would invest  5,313  in FlexShares Morningstar Emerging on September 3, 2024 and sell it today you would earn a total of  71.69  from holding FlexShares Morningstar Emerging or generate 1.35% return on investment over 90 days.

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

FlexShares Morningstar Emergin  vs.  Hartford Multifactor Emerging

FlexShares Morningstar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares Morningstar Emerging are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, FlexShares Morningstar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Hartford Multifactor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hartford Multifactor Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Hartford Multifactor is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FlexShares Morningstar and Hartford Multifactor

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

The idea behind FlexShares Morningstar Emerging and Hartford Multifactor Emerging 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.