Correlation Between Hennessy Focus and Prudential Qma
Can any of the company-specific risk be diversified away by investing in both Hennessy Focus and Prudential Qma 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 Focus and Prudential Qma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Focus Fund and Prudential Qma Small Cap, you can compare the effects of market volatilities on Hennessy Focus and Prudential Qma 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 Focus with a short position of Prudential Qma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Focus and Prudential Qma.
Diversification Opportunities for Hennessy Focus and Prudential Qma
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hennessy and Prudential is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Focus Fund and Prudential Qma Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Qma Small and Hennessy Focus 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 Focus Fund are associated (or correlated) with Prudential Qma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Qma Small has no effect on the direction of Hennessy Focus i.e., Hennessy Focus and Prudential Qma go up and down completely randomly.
Pair Corralation between Hennessy Focus and Prudential Qma
Assuming the 90 days horizon Hennessy Focus is expected to generate 1.48 times less return on investment than Prudential Qma. But when comparing it to its historical volatility, Hennessy Focus Fund is 1.68 times less risky than Prudential Qma. It trades about 0.28 of its potential returns per unit of risk. Prudential Qma Small Cap is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,862 in Prudential Qma Small Cap on September 1, 2024 and sell it today you would earn a total of 171.00 from holding Prudential Qma Small Cap or generate 9.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Hennessy Focus Fund vs. Prudential Qma Small Cap
Performance |
| Timeline |
| Hennessy Focus |
| Prudential Qma Small |
Hennessy Focus and Prudential Qma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Focus and Prudential Qma
The main advantage of trading using opposite Hennessy Focus and Prudential Qma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Focus position performs unexpectedly, Prudential Qma 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 Prudential Qma will offset losses from the drop in Prudential Qma's long position.| Hennessy Focus vs. Hennessy Nerstone Mid | Hennessy Focus vs. Amg Yacktman Focused | Hennessy Focus vs. Parnassus Endeavor Fund | Hennessy Focus vs. Hennessy Small 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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