Correlation Between Hennessy Gas and Utilities Portfolio
Can any of the company-specific risk be diversified away by investing in both Hennessy Gas and Utilities Portfolio 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 Hennessy Gas and Utilities Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Gas Utility and Utilities Portfolio Utilities, you can compare the effects of market volatilities on Hennessy Gas and Utilities Portfolio 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 Hennessy Gas with a short position of Utilities Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Gas and Utilities Portfolio.
Diversification Opportunities for Hennessy Gas and Utilities Portfolio
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Utilities is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Gas Utility and Utilities Portfolio Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Portfolio and Hennessy Gas 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 Hennessy Gas Utility are associated (or correlated) with Utilities Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Portfolio has no effect on the direction of Hennessy Gas i.e., Hennessy Gas and Utilities Portfolio go up and down completely randomly.
Pair Corralation between Hennessy Gas and Utilities Portfolio
Assuming the 90 days horizon Hennessy Gas Utility is expected to under-perform the Utilities Portfolio. In addition to that, Hennessy Gas is 1.28 times more volatile than Utilities Portfolio Utilities. It trades about -0.22 of its total potential returns per unit of risk. Utilities Portfolio Utilities is currently generating about -0.01 per unit of volatility. If you would invest 12,640 in Utilities Portfolio Utilities on September 13, 2024 and sell it today you would lose (28.00) from holding Utilities Portfolio Utilities or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Gas Utility vs. Utilities Portfolio Utilities
Performance |
| Timeline |
| Hennessy Gas Utility |
| Utilities Portfolio |
Hennessy Gas and Utilities Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Gas and Utilities Portfolio
The main advantage of trading using opposite Hennessy Gas and Utilities Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Gas position performs unexpectedly, Utilities Portfolio 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 Utilities Portfolio will offset losses from the drop in Utilities Portfolio's long position.| Hennessy Gas vs. Utilities Fund Investor | Hennessy Gas vs. Amg Yacktman Focused | Hennessy Gas vs. Chemicals Portfolio Chemicals | Hennessy Gas vs. Invesco Energy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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