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 Value and The Hartford Small, 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
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and The is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and The Hartford Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Small 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 Value 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 Small 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 is expected to generate 1.28 times less return on investment than The Hartford. In addition to that, Small Cap is 1.1 times more volatile than The Hartford Small. It trades about 0.1 of its total potential returns per unit of risk. The Hartford Small is currently generating about 0.14 per unit of volatility. If you would invest 5,034 in The Hartford Small on August 29, 2024 and sell it today you would earn a total of 385.00 from holding The Hartford Small or generate 7.65% 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 Value vs. The Hartford Small
Performance |
| Timeline |
| Small Cap Value |
| Hartford Small |
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. Ultra Short Fixed Income | Small Cap vs. Dodge International Stock | Small Cap vs. Small Cap Equity | Small Cap vs. Dreyfusstandish Global Fixed |
| The Hartford vs. Vanguard Strategic Small Cap | The Hartford vs. Small Midcap Dividend Income | The Hartford vs. Qs Small Capitalization | The Hartford vs. Kinetics Small Cap |
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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