Correlation Between Elcom International and Hennessy Technology
Can any of the company-specific risk be diversified away by investing in both Elcom International and Hennessy Technology 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 Elcom International and Hennessy Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elcom International and Hennessy Technology Fund, you can compare the effects of market volatilities on Elcom International and Hennessy Technology 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 Elcom International with a short position of Hennessy Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elcom International and Hennessy Technology.
Diversification Opportunities for Elcom International and Hennessy Technology
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Elcom and Hennessy is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Elcom International and Hennessy Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Technology and Elcom International 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 Elcom International are associated (or correlated) with Hennessy Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Technology has no effect on the direction of Elcom International i.e., Elcom International and Hennessy Technology go up and down completely randomly.
Pair Corralation between Elcom International and Hennessy Technology
Given the investment horizon of 90 days Elcom International is expected to under-perform the Hennessy Technology. In addition to that, Elcom International is 1.14 times more volatile than Hennessy Technology Fund. It trades about -0.15 of its total potential returns per unit of risk. Hennessy Technology Fund is currently generating about 0.08 per unit of volatility. If you would invest 1,614 in Hennessy Technology Fund on September 2, 2024 and sell it today you would earn a total of 858.00 from holding Hennessy Technology Fund or generate 53.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 8.47% |
| Values | Daily Returns |
Elcom International vs. Hennessy Technology Fund
Performance |
| Timeline |
| Elcom International |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Hennessy Technology |
Elcom International and Hennessy Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elcom International and Hennessy Technology
The main advantage of trading using opposite Elcom International and Hennessy Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elcom International position performs unexpectedly, Hennessy Technology 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 Technology will offset losses from the drop in Hennessy Technology's long position.| Elcom International vs. NuGene International | Elcom International vs. Zoom Video Communications | Elcom International vs. Bowmo Inc | Elcom International vs. Epazz Inc |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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