Correlation Between Hennessy Total and Hennessy Cornerstone
Can any of the company-specific risk be diversified away by investing in both Hennessy Total and Hennessy Cornerstone 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 Total and Hennessy Cornerstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Total Return and Hennessy Nerstone Value, you can compare the effects of market volatilities on Hennessy Total and Hennessy Cornerstone 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 Total with a short position of Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Total and Hennessy Cornerstone.
Diversification Opportunities for Hennessy Total and Hennessy Cornerstone
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Hennessy and Hennessy is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Total Return and Hennessy Nerstone Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Value and Hennessy Total 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 Total Return are associated (or correlated) with Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Value has no effect on the direction of Hennessy Total i.e., Hennessy Total and Hennessy Cornerstone go up and down completely randomly.
Pair Corralation between Hennessy Total and Hennessy Cornerstone
Assuming the 90 days horizon Hennessy Total is expected to generate 1.06 times less return on investment than Hennessy Cornerstone. But when comparing it to its historical volatility, Hennessy Total Return is 1.48 times less risky than Hennessy Cornerstone. It trades about 0.51 of its potential returns per unit of risk. Hennessy Nerstone Value is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 2,028 in Hennessy Nerstone Value on November 2, 2024 and sell it today you would earn a total of 104.00 from holding Hennessy Nerstone Value or generate 5.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Hennessy Total Return vs. Hennessy Nerstone Value
Performance |
| Timeline |
| Hennessy Total Return |
| Hennessy Nerstone Value |
Hennessy Total and Hennessy Cornerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Total and Hennessy Cornerstone
The main advantage of trading using opposite Hennessy Total and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Total position performs unexpectedly, Hennessy Cornerstone 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 Cornerstone will offset losses from the drop in Hennessy Cornerstone's long position.| Hennessy Total vs. Hennessy Balanced Fund | Hennessy Total vs. Hennessy Nerstone Value | Hennessy Total vs. Hennessy Nerstone Growth | Hennessy Total vs. Harbor Large Cap |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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