Correlation Between Davis Financial and Hennessy Large
Can any of the company-specific risk be diversified away by investing in both Davis Financial and Hennessy 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 Davis Financial and Hennessy Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Davis Financial Fund and Hennessy Large Cap, you can compare the effects of market volatilities on Davis Financial and Hennessy 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 Davis Financial with a short position of Hennessy Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Davis Financial and Hennessy Large.
Diversification Opportunities for Davis Financial and Hennessy Large
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Davis and Hennessy is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Davis Financial Fund and Hennessy Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Large Cap and Davis Financial 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 Davis Financial Fund are associated (or correlated) with Hennessy Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Large Cap has no effect on the direction of Davis Financial i.e., Davis Financial and Hennessy Large go up and down completely randomly.
Pair Corralation between Davis Financial and Hennessy Large
Assuming the 90 days horizon Davis Financial is expected to generate 1.62 times less return on investment than Hennessy Large. But when comparing it to its historical volatility, Davis Financial Fund is 1.77 times less risky than Hennessy Large. It trades about 0.26 of its potential returns per unit of risk. Hennessy Large Cap is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,816 in Hennessy Large Cap on August 31, 2024 and sell it today you would earn a total of 396.00 from holding Hennessy Large Cap or generate 14.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Davis Financial Fund vs. Hennessy Large Cap
Performance |
| Timeline |
| Davis Financial |
| Hennessy Large Cap |
Davis Financial and Hennessy Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Davis Financial and Hennessy Large
The main advantage of trading using opposite Davis Financial and Hennessy Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Davis Financial position performs unexpectedly, Hennessy 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 Hennessy Large will offset losses from the drop in Hennessy Large's long position.| Davis Financial vs. Vanguard Financials Index | Davis Financial vs. Regional Bank Fund | Davis Financial vs. Regional Bank Fund | Davis Financial vs. T Rowe Price |
| Hennessy Large vs. Hennessy Large Cap | Hennessy Large vs. Dow 2x Strategy | Hennessy Large vs. Dow 2x Strategy | Hennessy Large vs. T Rowe Price |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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