Correlation Between Vanguard FTSE and Hartford Multifactor

Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and Hartford Multifactor 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 FTSE and Hartford Multifactor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard FTSE Emerging and Hartford Multifactor Emerging, you can compare the effects of market volatilities on Vanguard FTSE and Hartford Multifactor 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 FTSE with a short position of Hartford Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and Hartford Multifactor.

Diversification Opportunities for Vanguard FTSE and Hartford Multifactor

0.92

Correlation Coefficient

Vanguard FTSE  Hartford Multifactor

Almost no diversification

The 3 months correlation between Vanguard and Hartford is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and Hartford Multifactor Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Multifactor and Vanguard FTSE 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 FTSE Emerging are associated (or correlated) with Hartford Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Multifactor has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Hartford Multifactor go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Hartford Multifactor

Considering the 90-day investment horizon Vanguard FTSE Emerging is expected to generate 1.13 times more return on investment than Hartford Multifactor. However, Vanguard FTSE is 1.13 times more volatile than Hartford Multifactor Emerging. It trades about 0.11 of its potential returns per unit of risk. Hartford Multifactor Emerging is currently generating about 0.04 per unit of risk. If you would invest  4,183  in Vanguard FTSE Emerging on February 8, 2024 and sell it today you would earn a total of  141.00  from holding Vanguard FTSE Emerging or generate 3.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Vanguard FTSE Emerging  vs.  Hartford Multifactor Emerging

Vanguard FTSE Emerging

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard FTSE Emerging are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Vanguard FTSE may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Hartford Multifactor

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Multifactor Emerging are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Hartford Multifactor is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard FTSE and Hartford Multifactor

The main advantage of trading using opposite Vanguard FTSE and Hartford Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, Hartford Multifactor 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 Multifactor will offset losses from the drop in Hartford Multifactor's long position.

The idea behind Vanguard FTSE Emerging and Hartford Multifactor Emerging 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 Transaction History module to view history of all your transactions and understand their impact on performance.