Correlation Between Hennessy Focus and Hennessy Small
Can any of the company-specific risk be diversified away by investing in both Hennessy Focus and Hennessy Small 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 Hennessy Small 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 Hennessy Small Cap, you can compare the effects of market volatilities on Hennessy Focus and Hennessy Small 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 Hennessy Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Focus and Hennessy Small.
Diversification Opportunities for Hennessy Focus and Hennessy Small
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hennessy and Hennessy is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Focus Fund and Hennessy Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Small Cap 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 Hennessy Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Small Cap has no effect on the direction of Hennessy Focus i.e., Hennessy Focus and Hennessy Small go up and down completely randomly.
Pair Corralation between Hennessy Focus and Hennessy Small
Assuming the 90 days horizon Hennessy Focus is expected to generate 10.95 times less return on investment than Hennessy Small. But when comparing it to its historical volatility, Hennessy Focus Fund is 2.29 times less risky than Hennessy Small. It trades about 0.03 of its potential returns per unit of risk. Hennessy Small Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,714 in Hennessy Small Cap on August 25, 2024 and sell it today you would earn a total of 460.00 from holding Hennessy Small Cap or generate 16.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Focus Fund vs. Hennessy Small Cap
Performance |
| Timeline |
| Hennessy Focus |
| Hennessy Small Cap |
Hennessy Focus and Hennessy Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Focus and Hennessy Small
The main advantage of trading using opposite Hennessy Focus and Hennessy Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Focus position performs unexpectedly, Hennessy Small 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 Small will offset losses from the drop in Hennessy Small'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 |
| Hennessy Small vs. Hennessy Large Cap | Hennessy Small vs. Rmb Mendon Financial | Hennessy Small vs. Hennessy Focus Fund | Hennessy Small vs. Rmb Mendon Financial |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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