Correlation Between The Hartford and Vanguard Wellesley

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

Diversification Opportunities for The Hartford and Vanguard Wellesley

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between The and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding The Hartford Balanced and Vanguard Wellesley Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Wellesley and The Hartford 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 The Hartford Balanced are associated (or correlated) with Vanguard Wellesley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Wellesley has no effect on the direction of The Hartford i.e., The Hartford and Vanguard Wellesley go up and down completely randomly.

Pair Corralation between The Hartford and Vanguard Wellesley

Assuming the 90 days horizon The Hartford Balanced is expected to under-perform the Vanguard Wellesley. In addition to that, The Hartford is 1.24 times more volatile than Vanguard Wellesley Income. It trades about -0.12 of its total potential returns per unit of risk. Vanguard Wellesley Income is currently generating about -0.15 per unit of volatility. If you would invest  2,478  in Vanguard Wellesley Income on January 17, 2024 and sell it today you would lose (32.00) from holding Vanguard Wellesley Income or give up 1.29% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

The Hartford Balanced  vs.  Vanguard Wellesley Income

 Performance 
       Timeline  
Hartford Balanced 

Risk-Adjusted Performance

2 of 100

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

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Wellesley Income are ranked lower than 1 (%) 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.

The Hartford and Vanguard Wellesley Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with The Hartford and Vanguard Wellesley

The main advantage of trading using opposite The Hartford and Vanguard Wellesley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Hartford position performs unexpectedly, Vanguard Wellesley 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 Vanguard Wellesley will offset losses from the drop in Vanguard Wellesley's long position.
The idea behind The Hartford Balanced and Vanguard Wellesley Income 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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