Correlation Between Hennessy Capital and Finwise Bancorp
Can any of the company-specific risk be diversified away by investing in both Hennessy Capital and Finwise Bancorp 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 Capital and Finwise Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Capital Investment and Finwise Bancorp, you can compare the effects of market volatilities on Hennessy Capital and Finwise Bancorp 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 Capital with a short position of Finwise Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Capital and Finwise Bancorp.
Diversification Opportunities for Hennessy Capital and Finwise Bancorp
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hennessy and Finwise is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Capital Investment and Finwise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finwise Bancorp and Hennessy Capital 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 Capital Investment are associated (or correlated) with Finwise Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finwise Bancorp has no effect on the direction of Hennessy Capital i.e., Hennessy Capital and Finwise Bancorp go up and down completely randomly.
Pair Corralation between Hennessy Capital and Finwise Bancorp
Assuming the 90 days horizon Hennessy Capital is expected to generate 9.87 times less return on investment than Finwise Bancorp. But when comparing it to its historical volatility, Hennessy Capital Investment is 1.61 times less risky than Finwise Bancorp. It trades about 0.01 of its potential returns per unit of risk. Finwise Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,010 in Finwise Bancorp on November 28, 2024 and sell it today you would earn a total of 904.00 from holding Finwise Bancorp or generate 89.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Capital Investment vs. Finwise Bancorp
Performance |
| Timeline |
| Hennessy Capital Inv |
| Finwise Bancorp |
Hennessy Capital and Finwise Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Capital and Finwise Bancorp
The main advantage of trading using opposite Hennessy Capital and Finwise Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Capital position performs unexpectedly, Finwise Bancorp 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 Finwise Bancorp will offset losses from the drop in Finwise Bancorp's long position.The idea behind Hennessy Capital Investment and Finwise Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Finwise Bancorp vs. Home Federal Bancorp | Finwise Bancorp vs. First Financial Northwest | Finwise Bancorp vs. First Northwest Bancorp | Finwise Bancorp vs. First Capital |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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