Correlation Between Vanguard Financials and The Hartford

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

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

Diversification Opportunities for Vanguard Financials and The Hartford

0.63

Correlation Coefficient

Vanguard Financials  The Hartford

Poor diversification

The 3 months correlation between Vanguard and The is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Financials Index and The Hartford Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Growth and Vanguard Financials 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 Vanguard Financials Index are associated (or correlated) with The Hartford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Growth has no effect on the direction of Vanguard Financials i.e., Vanguard Financials and The Hartford go up and down completely randomly.

Pair Corralation between Vanguard Financials and The Hartford

Assuming the 90 days horizon Vanguard Financials is expected to generate 1.43 times less return on investment than The Hartford. In addition to that, Vanguard Financials is 1.13 times more volatile than The Hartford Growth. It trades about 0.09 of its total potential returns per unit of risk. The Hartford Growth is currently generating about 0.15 per unit of volatility. If you would invest  5,536  in The Hartford Growth on October 9, 2024 and sell it today you would earn a total of  565.00  from holding The Hartford Growth or generate 10.21% return on investment over 90 days.

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

Vanguard Financials Index  vs.  The Hartford Growth

Vanguard Financials Index

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Financials Index are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Vanguard Financials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hartford Growth

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Vanguard Financials and The Hartford

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

The idea behind Vanguard Financials Index and The Hartford Growth 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.