Correlation Between Small Cap and The Hartford
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and The Hartford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and The Hartford Equity, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of The Hartford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and The Hartford.
Diversification Opportunities for Small Cap and The Hartford
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and The is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and The Hartford Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Equity and Small Cap 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 Small Cap Equity 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 Equity has no effect on the direction of Small Cap i.e., Small Cap and The Hartford go up and down completely randomly.
Pair Corralation between Small Cap and The Hartford
Assuming the 90 days horizon Small Cap Equity is expected to generate 1.86 times more return on investment than The Hartford. However, Small Cap is 1.86 times more volatile than The Hartford Equity. It trades about 0.08 of its potential returns per unit of risk. The Hartford Equity is currently generating about 0.12 per unit of risk. If you would invest 1,754 in Small Cap Equity on September 3, 2024 and sell it today you would earn a total of 277.00 from holding Small Cap Equity or generate 15.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. The Hartford Equity
Performance |
| Timeline |
| Small Cap Equity |
| Hartford Equity |
Small Cap and The Hartford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and The Hartford
The main advantage of trading using opposite Small Cap and The Hartford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Semiconductor Ultrasector Profund | Small Cap vs. Qs Large Cap | Small Cap vs. Fm Investments Large | Small Cap vs. T Rowe Price |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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