Correlation Between Federated International and Hartford International
Can any of the company-specific risk be diversified away by investing in both Federated International and Hartford International 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 International and Hartford International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated International Strategic and The Hartford International, you can compare the effects of market volatilities on Federated International and Hartford International 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 International with a short position of Hartford International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated International and Hartford International.
Diversification Opportunities for Federated International and Hartford International
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Federated and Hartford is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Federated International Strate and The Hartford International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford International and Federated International 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 International Strategic are associated (or correlated) with Hartford International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford International has no effect on the direction of Federated International i.e., Federated International and Hartford International go up and down completely randomly.
Pair Corralation between Federated International and Hartford International
Assuming the 90 days horizon Federated International is expected to generate 1.71 times less return on investment than Hartford International. But when comparing it to its historical volatility, Federated International Strategic is 1.12 times less risky than Hartford International. It trades about 0.05 of its potential returns per unit of risk. The Hartford International is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,484 in The Hartford International on September 13, 2024 and sell it today you would earn a total of 421.00 from holding The Hartford International or generate 28.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated International Strate vs. The Hartford International
Performance |
| Timeline |
| Federated International |
| Hartford International |
Federated International and Hartford International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated International and Hartford International
The main advantage of trading using opposite Federated International and Hartford International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated International position performs unexpectedly, Hartford International 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 International will offset losses from the drop in Hartford International's long position.The idea behind Federated International Strategic and The Hartford International 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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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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