Correlation Between Vanguard Mega and Hartford Large

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

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

Diversification Opportunities for Vanguard Mega and Hartford Large

0.89

Correlation Coefficient

Vanguard Mega  Hartford Large

Very poor diversification

The 3 months correlation between Vanguard and Hartford is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mega Cap and Hartford Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Large Cap and Vanguard Mega 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 Mega Cap are associated (or correlated) with Hartford Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Large Cap has no effect on the direction of Vanguard Mega i.e., Vanguard Mega and Hartford Large go up and down completely randomly.

Pair Corralation between Vanguard Mega and Hartford Large

Considering the 90-day investment horizon Vanguard Mega Cap is expected to generate 0.9 times more return on investment than Hartford Large. However, Vanguard Mega Cap is 1.11 times less risky than Hartford Large. It trades about 0.12 of its potential returns per unit of risk. Hartford Large Cap is currently generating about 0.11 per unit of risk. If you would invest  28,115  in Vanguard Mega Cap on March 10, 2024 and sell it today you would earn a total of  2,117  from holding Vanguard Mega Cap or generate 7.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Vanguard Mega Cap  vs.  Hartford Large Cap

Vanguard Mega Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mega Cap are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Vanguard Mega may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Hartford Large Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hartford Large Cap are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Hartford Large may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Vanguard Mega and Hartford Large

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

The idea behind Vanguard Mega Cap and Hartford Large Cap 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.