Correlation Between Fidelity Japan and Hennessy Japan
Can any of the company-specific risk be diversified away by investing in both Fidelity Japan and Hennessy Japan 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 Fidelity Japan and Hennessy Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Japan Smaller and Hennessy Japan Fund, you can compare the effects of market volatilities on Fidelity Japan and Hennessy Japan 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 Fidelity Japan with a short position of Hennessy Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Japan and Hennessy Japan.
Diversification Opportunities for Fidelity Japan and Hennessy Japan
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Fidelity and Hennessy is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Japan Smaller and Hennessy Japan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Japan and Fidelity Japan 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 Fidelity Japan Smaller are associated (or correlated) with Hennessy Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Japan has no effect on the direction of Fidelity Japan i.e., Fidelity Japan and Hennessy Japan go up and down completely randomly.
Pair Corralation between Fidelity Japan and Hennessy Japan
Assuming the 90 days horizon Fidelity Japan is expected to generate 1.17 times less return on investment than Hennessy Japan. But when comparing it to its historical volatility, Fidelity Japan Smaller is 1.19 times less risky than Hennessy Japan. It trades about 0.06 of its potential returns per unit of risk. Hennessy Japan Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 4,192 in Hennessy Japan Fund on September 13, 2024 and sell it today you would earn a total of 437.00 from holding Hennessy Japan Fund or generate 10.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fidelity Japan Smaller vs. Hennessy Japan Fund
Performance |
| Timeline |
| Fidelity Japan Smaller |
| Hennessy Japan |
Fidelity Japan and Hennessy Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Japan and Hennessy Japan
The main advantage of trading using opposite Fidelity Japan and Hennessy Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Japan position performs unexpectedly, Hennessy Japan 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 Japan will offset losses from the drop in Hennessy Japan's long position.| Fidelity Japan vs. Fidelity Freedom 2015 | Fidelity Japan vs. Fidelity Puritan Fund | Fidelity Japan vs. Fidelity Puritan Fund | Fidelity Japan vs. Fidelity Pennsylvania Municipal |
| Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Hennessy Japan Small | Hennessy Japan vs. Matthews Japan Fund | Hennessy Japan vs. Matthews India 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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