Correlation Between Vanguard Small-cap and The Hartford
Can any of the company-specific risk be diversified away by investing in both Vanguard 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 Vanguard 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 Vanguard Small Cap Growth and The Hartford Small, you can compare the effects of market volatilities on Vanguard 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 Vanguard Small-cap with a short position of The Hartford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Small-cap and The Hartford.
Diversification Opportunities for Vanguard Small-cap and The Hartford
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vanguard and THE is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Small Cap Growth and The Hartford Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Small and Vanguard 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 Vanguard Small Cap Growth 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 Vanguard Small-cap i.e., Vanguard Small-cap and The Hartford go up and down completely randomly.
Pair Corralation between Vanguard Small-cap and The Hartford
Assuming the 90 days horizon Vanguard Small Cap Growth is expected to generate 0.9 times more return on investment than The Hartford. However, Vanguard Small Cap Growth is 1.11 times less risky than The Hartford. It trades about 0.39 of its potential returns per unit of risk. The Hartford Small is currently generating about 0.23 per unit of risk. If you would invest 7,644 in Vanguard Small Cap Growth on August 28, 2024 and sell it today you would earn a total of 846.00 from holding Vanguard Small Cap Growth or generate 11.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vanguard Small Cap Growth vs. The Hartford Small
Performance |
| Timeline |
| Vanguard Small Cap |
| Hartford Small |
Vanguard Small-cap and The Hartford Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Small-cap and The Hartford
The main advantage of trading using opposite Vanguard Small-cap and The Hartford positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 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.The idea behind Vanguard Small Cap Growth and The Hartford Small 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.
| 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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