Correlation Between Vanguard Global and The Hartford
Can any of the company-specific risk be diversified away by investing in both Vanguard Global 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 Vanguard Global and The Hartford into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Global Credit and The Hartford Balanced, you can compare the effects of market volatilities on Vanguard Global 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 Vanguard Global with a short position of The Hartford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Global and The Hartford.
Diversification Opportunities for Vanguard Global and The Hartford
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VANGUARD and The is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Global Credit and The Hartford Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Balanced and Vanguard Global 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 Vanguard Global Credit 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 Balanced has no effect on the direction of Vanguard Global i.e., Vanguard Global and The Hartford go up and down completely randomly.
Pair Corralation between Vanguard Global and The Hartford
Assuming the 90 days horizon Vanguard Global is expected to generate 1.33 times less return on investment than The Hartford. But when comparing it to its historical volatility, Vanguard Global Credit is 1.08 times less risky than The Hartford. It trades about 0.13 of its potential returns per unit of risk. The Hartford Balanced is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,697 in The Hartford Balanced on August 25, 2024 and sell it today you would earn a total of 287.00 from holding The Hartford Balanced or generate 16.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Global Credit vs. The Hartford Balanced
Performance |
| Timeline |
| Vanguard Global Credit |
| Hartford Balanced |
Vanguard Global and The Hartford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Global and The Hartford
The main advantage of trading using opposite Vanguard Global and The Hartford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Global 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.The idea behind Vanguard Global Credit and The Hartford Balanced 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 Stocks Directory module to find actively traded stocks across global markets.
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