Correlation Between Visa and Hartford Disciplined

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

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

Diversification Opportunities for Visa and Hartford Disciplined

0.82

Correlation Coefficient

Visa  Hartford Disciplined

Very poor diversification

The 3 months correlation between Visa and Hartford is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Hartford Disciplined Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Disciplined and Visa 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 Visa Class A are associated (or correlated) with Hartford Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Disciplined has no effect on the direction of Visa i.e., Visa and Hartford Disciplined go up and down completely randomly.

Pair Corralation between Visa and Hartford Disciplined

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.23 times more return on investment than Hartford Disciplined. However, Visa is 1.23 times more volatile than Hartford Disciplined Equity. It trades about 0.06 of its potential returns per unit of risk. Hartford Disciplined Equity is currently generating about -0.1 per unit of risk. If you would invest  31,508  in Visa Class A on September 29, 2024 and sell it today you would earn a total of  358.00  from holding Visa Class A or generate 1.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Visa Class A  vs.  Hartford Disciplined Equity

Visa Class A

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

Hartford Disciplined

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Disciplined Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Hartford Disciplined is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Visa and Hartford Disciplined

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

The idea behind Visa Class A and Hartford Disciplined 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.