Correlation Between GM and Hartford Financial
Can any of the company-specific risk be diversified away by investing in both GM and Hartford Financial 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 GM and Hartford Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and The Hartford Financial, you can compare the effects of market volatilities on GM and Hartford Financial 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 GM with a short position of Hartford Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Hartford Financial.
Diversification Opportunities for GM and Hartford Financial
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GM and Hartford is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and The Hartford Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Hartford Financial and GM 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 General Motors are associated (or correlated) with Hartford Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Hartford Financial has no effect on the direction of GM i.e., GM and Hartford Financial go up and down completely randomly.
Pair Corralation between GM and Hartford Financial
Allowing for the 90-day total investment horizon GM is expected to generate 1.18 times less return on investment than Hartford Financial. In addition to that, GM is 1.51 times more volatile than The Hartford Financial. It trades about 0.05 of its total potential returns per unit of risk. The Hartford Financial is currently generating about 0.08 per unit of volatility. If you would invest 6,818 in The Hartford Financial on September 3, 2024 and sell it today you would earn a total of 4,882 from holding The Hartford Financial or generate 71.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.02% |
| Values | Daily Returns |
General Motors vs. The Hartford Financial
Performance |
| Timeline |
| General Motors |
| The Hartford Financial |
GM and Hartford Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Hartford Financial
The main advantage of trading using opposite GM and Hartford Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Hartford Financial 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 Financial will offset losses from the drop in Hartford Financial's long position.The idea behind General Motors and The Hartford Financial 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 Financial vs. Berkshire Hathaway | Hartford Financial vs. Berkshire Hathaway | Hartford Financial vs. Superior Plus Corp | Hartford Financial vs. NMI Holdings |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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