Correlation Between TSJA and Hartford Multifactor

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

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

Diversification Opportunities for TSJA and Hartford Multifactor

0.77

Correlation Coefficient

TSJA  Hartford Multifactor

Poor diversification

The 3 months correlation between TSJA and Hartford is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding TSJA and Hartford Multifactor Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Multifactor and TSJA 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 TSJA 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 TSJA i.e., TSJA and Hartford Multifactor go up and down completely randomly.

Pair Corralation between TSJA and Hartford Multifactor

Given the investment horizon of 90 days TSJA is expected to generate 1.65 times less return on investment than Hartford Multifactor. But when comparing it to its historical volatility, TSJA is 12.21 times less risky than Hartford Multifactor. It trades about 0.83 of its potential returns per unit of risk. Hartford Multifactor Equity is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,129  in Hartford Multifactor Equity on September 12, 2024 and sell it today you would earn a total of  1,197  from holding Hartford Multifactor Equity or generate 28.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.14%
Values	Daily Returns

TSJA  vs.  Hartford Multifactor Equity

TSJA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TSJA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking indicators, TSJA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hartford Multifactor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Multifactor Equity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Hartford Multifactor is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TSJA and Hartford Multifactor

The main advantage of trading using opposite TSJA and Hartford Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TSJA 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 TSJA and Hartford Multifactor Equity 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.