Correlation Between State Street and The Hartford
Can any of the company-specific risk be diversified away by investing in both State Street 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 State Street and The Hartford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between State Street Target and The Hartford Small, you can compare the effects of market volatilities on State Street 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 State Street with a short position of The Hartford. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Street and The Hartford.
Diversification Opportunities for State Street and The Hartford
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between State and THE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding State Street Target and The Hartford Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Small and State Street 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 State Street Target 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 State Street i.e., State Street and The Hartford go up and down completely randomly.
Pair Corralation between State Street and The Hartford
Assuming the 90 days horizon State Street is expected to generate 1.34 times less return on investment than The Hartford. But when comparing it to its historical volatility, State Street Target is 2.21 times less risky than The Hartford. It trades about 0.09 of its potential returns per unit of risk. The Hartford Small is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,352 in The Hartford Small on August 25, 2024 and sell it today you would earn a total of 756.00 from holding The Hartford Small or generate 32.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
State Street Target vs. The Hartford Small
Performance |
| Timeline |
| State Street Target |
| Hartford Small |
State Street and The Hartford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with State Street and The Hartford
The main advantage of trading using opposite State Street and The Hartford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if State Street 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.| State Street vs. The Hartford Small | State Street vs. The Hartford Small | State Street vs. Vanguard Small Cap Index | State Street vs. Massmutual Select Small |
| The Hartford vs. The Hartford Growth | The Hartford vs. The Hartford Growth | The Hartford vs. The Hartford Growth | The Hartford vs. The Hartford Growth |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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