Correlation Between Vanguard Wellesley and Hartford Balanced

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Can any of the company-specific risk be diversified away by investing in both Vanguard Wellesley and Hartford Balanced 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 Wellesley and Hartford Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Wellesley Income and The Hartford Balanced, you can compare the effects of market volatilities on Vanguard Wellesley and Hartford Balanced 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 Wellesley with a short position of Hartford Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Wellesley and Hartford Balanced.

Diversification Opportunities for Vanguard Wellesley and Hartford Balanced

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Vanguard and Hartford is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Wellesley Income 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 Wellesley 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 Wellesley Income are associated (or correlated) with Hartford Balanced. 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 Wellesley i.e., Vanguard Wellesley and Hartford Balanced go up and down completely randomly.

Pair Corralation between Vanguard Wellesley and Hartford Balanced

Assuming the 90 days horizon Vanguard Wellesley Income is expected to generate 1.06 times more return on investment than Hartford Balanced. However, Vanguard Wellesley is 1.06 times more volatile than The Hartford Balanced. It trades about 0.11 of its potential returns per unit of risk. The Hartford Balanced is currently generating about 0.11 per unit of risk. If you would invest  2,351  in Vanguard Wellesley Income on September 12, 2024 and sell it today you would earn a total of  271.00  from holding Vanguard Wellesley Income or generate 11.53% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Vanguard Wellesley Income  vs.  The Hartford Balanced

 Performance 
       Timeline  
Vanguard Wellesley Income 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Wellesley Income are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vanguard Wellesley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Hartford Balanced 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Balanced are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Hartford Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Wellesley and Hartford Balanced Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vanguard Wellesley and Hartford Balanced

The main advantage of trading using opposite Vanguard Wellesley and Hartford Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Wellesley position performs unexpectedly, Hartford Balanced 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 Hartford Balanced will offset losses from the drop in Hartford Balanced's long position.
The idea behind Vanguard Wellesley Income 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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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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