Correlation Between Hennessy Cornerstone and Applied Finance
Can any of the company-specific risk be diversified away by investing in both Hennessy Cornerstone and Applied Finance 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 Cornerstone and Applied Finance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Nerstone Mid and Applied Finance Explorer, you can compare the effects of market volatilities on Hennessy Cornerstone and Applied Finance 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 Cornerstone with a short position of Applied Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Cornerstone and Applied Finance.
Diversification Opportunities for Hennessy Cornerstone and Applied Finance
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Applied is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Mid and Applied Finance Explorer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Finance Explorer and Hennessy Cornerstone 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 Nerstone Mid are associated (or correlated) with Applied Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Finance Explorer has no effect on the direction of Hennessy Cornerstone i.e., Hennessy Cornerstone and Applied Finance go up and down completely randomly.
Pair Corralation between Hennessy Cornerstone and Applied Finance
Assuming the 90 days horizon Hennessy Nerstone Mid is expected to under-perform the Applied Finance. In addition to that, Hennessy Cornerstone is 1.21 times more volatile than Applied Finance Explorer. It trades about -0.3 of its total potential returns per unit of risk. Applied Finance Explorer is currently generating about -0.29 per unit of volatility. If you would invest 2,272 in Applied Finance Explorer on November 27, 2024 and sell it today you would lose (114.00) from holding Applied Finance Explorer or give up 5.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Nerstone Mid vs. Applied Finance Explorer
Performance |
| Timeline |
| Hennessy Nerstone Mid |
| Applied Finance Explorer |
Hennessy Cornerstone and Applied Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Cornerstone and Applied Finance
The main advantage of trading using opposite Hennessy Cornerstone and Applied Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Cornerstone position performs unexpectedly, Applied Finance 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 Applied Finance will offset losses from the drop in Applied Finance's long position.| Hennessy Cornerstone vs. Hennessy Focus Fund | Hennessy Cornerstone vs. Small Company Stock Fund | Hennessy Cornerstone vs. Large Cap E | Hennessy Cornerstone vs. Eventide Gilead Fund |
| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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