Correlation Between Federated Government and The Hartford
Can any of the company-specific risk be diversified away by investing in both Federated Government 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 Federated Government and The Hartford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Government Ultrashort and The Hartford Growth, you can compare the effects of market volatilities on Federated Government 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 Federated Government with a short position of The Hartford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Government and The Hartford.
Diversification Opportunities for Federated Government and The Hartford
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Federated and The is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Federated Government Ultrashor and The Hartford Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Growth and Federated Government 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 Federated Government Ultrashort 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 Federated Government i.e., Federated Government and The Hartford go up and down completely randomly.
Pair Corralation between Federated Government and The Hartford
Assuming the 90 days horizon Federated Government is expected to generate 4.35 times less return on investment than The Hartford. But when comparing it to its historical volatility, Federated Government Ultrashort is 11.18 times less risky than The Hartford. It trades about 0.23 of its potential returns per unit of risk. The Hartford Growth is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,646 in The Hartford Growth on November 8, 2024 and sell it today you would earn a total of 1,428 from holding The Hartford Growth or generate 30.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Government Ultrashor vs. The Hartford Growth
Performance |
| Timeline |
| Federated Government |
| Hartford Growth |
Federated Government and The Hartford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Government and The Hartford
The main advantage of trading using opposite Federated Government and The Hartford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Government 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.| Federated Government vs. Angel Oak Ultrashort | Federated Government vs. Oakhurst Short Duration | Federated Government vs. Transam Short Term Bond | Federated Government vs. Old Westbury Short Term |
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Check out your portfolio center.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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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