Correlation Between Financials Ultrasector and Hennessy Large
Can any of the company-specific risk be diversified away by investing in both Financials Ultrasector 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 Financials Ultrasector and Hennessy Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financials Ultrasector Profund and Hennessy Large Cap, you can compare the effects of market volatilities on Financials Ultrasector 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 Financials Ultrasector with a short position of Hennessy Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financials Ultrasector and Hennessy Large.
Diversification Opportunities for Financials Ultrasector and Hennessy Large
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financials and Hennessy is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Financials Ultrasector Profund 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 Financials Ultrasector 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 Financials Ultrasector Profund 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 Financials Ultrasector i.e., Financials Ultrasector and Hennessy Large go up and down completely randomly.
Pair Corralation between Financials Ultrasector and Hennessy Large
Assuming the 90 days horizon Financials Ultrasector is expected to generate 1.06 times less return on investment than Hennessy Large. But when comparing it to its historical volatility, Financials Ultrasector Profund is 1.15 times less risky than Hennessy Large. It trades about 0.24 of its potential returns per unit of risk. Hennessy Large Cap is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,825 in Hennessy Large Cap on August 29, 2024 and sell it today you would earn a total of 372.00 from holding Hennessy Large Cap or generate 13.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Financials Ultrasector Profund vs. Hennessy Large Cap
Performance |
| Timeline |
| Financials Ultrasector |
| Hennessy Large Cap |
Financials Ultrasector and Hennessy Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financials Ultrasector and Hennessy Large
The main advantage of trading using opposite Financials Ultrasector and Hennessy Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financials Ultrasector 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.| Financials Ultrasector vs. Direxion Monthly Nasdaq 100 | Financials Ultrasector vs. HUMANA INC | Financials Ultrasector vs. Aquagold International | Financials Ultrasector vs. Barloworld Ltd ADR |
| Hennessy Large vs. Vanguard Financials Index | Hennessy Large vs. T Rowe Price | Hennessy Large vs. Davis Financial Fund | Hennessy Large vs. HUMANA INC |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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