Correlation Between Balanced Allocation and Hartford Moderate
Can any of the company-specific risk be diversified away by investing in both Balanced Allocation and Hartford Moderate 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 Balanced Allocation and Hartford Moderate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Allocation Fund and Hartford Moderate Allocation, you can compare the effects of market volatilities on Balanced Allocation and Hartford Moderate 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 Balanced Allocation with a short position of Hartford Moderate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Allocation and Hartford Moderate.
Diversification Opportunities for Balanced Allocation and Hartford Moderate
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Balanced and HARTFORD is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Allocation Fund and Hartford Moderate Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Moderate and Balanced Allocation 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 Balanced Allocation Fund are associated (or correlated) with Hartford Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Moderate has no effect on the direction of Balanced Allocation i.e., Balanced Allocation and Hartford Moderate go up and down completely randomly.
Pair Corralation between Balanced Allocation and Hartford Moderate
Assuming the 90 days horizon Balanced Allocation is expected to generate 1.24 times less return on investment than Hartford Moderate. But when comparing it to its historical volatility, Balanced Allocation Fund is 1.18 times less risky than Hartford Moderate. It trades about 0.08 of its potential returns per unit of risk. Hartford Moderate Allocation is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,074 in Hartford Moderate Allocation on November 1, 2024 and sell it today you would earn a total of 233.00 from holding Hartford Moderate Allocation or generate 21.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Allocation Fund vs. Hartford Moderate Allocation
Performance |
| Timeline |
| Balanced Allocation |
| Hartford Moderate |
Balanced Allocation and Hartford Moderate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Allocation and Hartford Moderate
The main advantage of trading using opposite Balanced Allocation and Hartford Moderate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Allocation position performs unexpectedly, Hartford Moderate 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 Moderate will offset losses from the drop in Hartford Moderate's long position.The idea behind Balanced Allocation Fund and Hartford Moderate Allocation 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.
| Hartford Moderate vs. The Hartford Growth | Hartford Moderate vs. The Hartford Growth | Hartford Moderate vs. The Hartford Growth | Hartford Moderate vs. The Hartford Growth |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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