Correlation Between Applied Finance and Hennessy Cornerstone
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Hennessy Cornerstone 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 Applied Finance and Hennessy Cornerstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Hennessy Nerstone Mid, you can compare the effects of market volatilities on Applied Finance and Hennessy Cornerstone 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 Applied Finance with a short position of Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Hennessy Cornerstone.
Diversification Opportunities for Applied Finance and Hennessy Cornerstone
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Applied and HENNESSY is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Hennessy Nerstone Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Mid and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Mid has no effect on the direction of Applied Finance i.e., Applied Finance and Hennessy Cornerstone go up and down completely randomly.
Pair Corralation between Applied Finance and Hennessy Cornerstone
Assuming the 90 days horizon Applied Finance is expected to generate 1.2 times less return on investment than Hennessy Cornerstone. In addition to that, Applied Finance is 1.23 times more volatile than Hennessy Nerstone Mid. It trades about 0.2 of its total potential returns per unit of risk. Hennessy Nerstone Mid is currently generating about 0.3 per unit of volatility. If you would invest 2,662 in Hennessy Nerstone Mid on August 29, 2024 and sell it today you would earn a total of 220.00 from holding Hennessy Nerstone Mid or generate 8.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Finance Explorer vs. Hennessy Nerstone Mid
Performance |
| Timeline |
| Applied Finance Explorer |
| Hennessy Nerstone Mid |
Applied Finance and Hennessy Cornerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Hennessy Cornerstone
The main advantage of trading using opposite Applied Finance and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Hennessy Cornerstone 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 Hennessy Cornerstone will offset losses from the drop in Hennessy Cornerstone's long position.| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
| Hennessy Cornerstone vs. Hennessy Focus Fund | Hennessy Cornerstone vs. Small Company Stock Fund | Hennessy Cornerstone vs. Large Cap E | Hennessy Cornerstone vs. Eventide Gilead Fund |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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