Correlation Between Hennessy Capital and Healthcare
Can any of the company-specific risk be diversified away by investing in both Hennessy Capital and Healthcare 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 Healthcare 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 Healthcare AI Acquisition, you can compare the effects of market volatilities on Hennessy Capital and Healthcare 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 Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Capital and Healthcare.
Diversification Opportunities for Hennessy Capital and Healthcare
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Hennessy and Healthcare is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Capital Investment and Healthcare AI Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare AI Acquisition 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 Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare AI Acquisition has no effect on the direction of Hennessy Capital i.e., Hennessy Capital and Healthcare go up and down completely randomly.
Pair Corralation between Hennessy Capital and Healthcare
Assuming the 90 days horizon Hennessy Capital is expected to generate 2.16 times less return on investment than Healthcare. But when comparing it to its historical volatility, Hennessy Capital Investment is 4.39 times less risky than Healthcare. It trades about 0.18 of its potential returns per unit of risk. Healthcare AI Acquisition is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1.60 in Healthcare AI Acquisition on October 26, 2024 and sell it today you would lose (0.48) from holding Healthcare AI Acquisition or give up 30.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 80.0% |
| Values | Daily Returns |
Hennessy Capital Investment vs. Healthcare AI Acquisition
Performance |
| Timeline |
| Hennessy Capital Inv |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| Healthcare AI Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Hennessy Capital and Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Capital and Healthcare
The main advantage of trading using opposite Hennessy Capital and Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Capital position performs unexpectedly, Healthcare 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 Healthcare will offset losses from the drop in Healthcare's long position.The idea behind Hennessy Capital Investment and Healthcare AI Acquisition 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.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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