Correlation Between The Hartford and Western Asset

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Can any of the company-specific risk be diversified away by investing in both The Hartford and Western Asset 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 The Hartford and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Hartford Emerging and Western Asset E, you can compare the effects of market volatilities on The Hartford and Western Asset 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 The Hartford with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Hartford and Western Asset.

Diversification Opportunities for The Hartford and Western Asset

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between THE and Western is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Emerging and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E and The Hartford 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 The Hartford Emerging are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of The Hartford i.e., The Hartford and Western Asset go up and down completely randomly.

Pair Corralation between The Hartford and Western Asset

Assuming the 90 days horizon The Hartford is expected to generate 1.39 times less return on investment than Western Asset. In addition to that, The Hartford is 1.06 times more volatile than Western Asset E. It trades about 0.03 of its total potential returns per unit of risk. Western Asset E is currently generating about 0.04 per unit of volatility. If you would invest  1,019  in Western Asset E on September 4, 2024 and sell it today you would earn a total of  42.00  from holding Western Asset E or generate 4.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.6%
ValuesDaily Returns

The Hartford Emerging  vs.  Western Asset E

 Performance 
       Timeline  
Hartford Emerging 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Hartford Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, The Hartford is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Western Asset E 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Western Asset E has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

The Hartford and Western Asset Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with The Hartford and Western Asset

The main advantage of trading using opposite The Hartford and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Hartford position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.
The idea behind The Hartford Emerging and Western Asset E 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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