Correlation Between Northern Small and The Hartford
Can any of the company-specific risk be diversified away by investing in both Northern Small 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 Northern Small and The Hartford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Small Cap and The Hartford Floating, you can compare the effects of market volatilities on Northern Small 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 Northern Small with a short position of The Hartford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern Small and The Hartford.
Diversification Opportunities for Northern Small and The Hartford
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NORTHERN and The is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Northern Small Cap and The Hartford Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Floating and Northern Small 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 Northern Small Cap 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 Floating has no effect on the direction of Northern Small i.e., Northern Small and The Hartford go up and down completely randomly.
Pair Corralation between Northern Small and The Hartford
Assuming the 90 days horizon Northern Small Cap is expected to generate 8.34 times more return on investment than The Hartford. However, Northern Small is 8.34 times more volatile than The Hartford Floating. It trades about 0.09 of its potential returns per unit of risk. The Hartford Floating is currently generating about 0.2 per unit of risk. If you would invest 1,237 in Northern Small Cap on September 4, 2024 and sell it today you would earn a total of 382.00 from holding Northern Small Cap or generate 30.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Northern Small Cap vs. The Hartford Floating
Performance |
| Timeline |
| Northern Small Cap |
| Hartford Floating |
Northern Small and The Hartford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern Small and The Hartford
The main advantage of trading using opposite Northern Small and The Hartford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Small 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.| Northern Small vs. Northern Bond Index | Northern Small vs. Northern E Bond | Northern Small vs. Northern Fixed Income | Northern Small vs. Northern Income Equity |
| The Hartford vs. Ab Bond Inflation | The Hartford vs. Lord Abbett Inflation | The Hartford vs. Aqr Managed Futures | The Hartford vs. Western Asset Inflation |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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