Correlation Between Hennessy Nerstone and Gmo Sgm
Can any of the company-specific risk be diversified away by investing in both Hennessy Nerstone and Gmo Sgm 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 Nerstone and Gmo Sgm 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 Gmo Sgm Major, you can compare the effects of market volatilities on Hennessy Nerstone and Gmo Sgm 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 Nerstone with a short position of Gmo Sgm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Nerstone and Gmo Sgm.
Diversification Opportunities for Hennessy Nerstone and Gmo Sgm
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Hennessy and Gmo is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Mid and Gmo Sgm Major in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo Sgm Major and Hennessy Nerstone 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 Gmo Sgm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Sgm Major has no effect on the direction of Hennessy Nerstone i.e., Hennessy Nerstone and Gmo Sgm go up and down completely randomly.
Pair Corralation between Hennessy Nerstone and Gmo Sgm
Assuming the 90 days horizon Hennessy Nerstone Mid is expected to generate 0.71 times more return on investment than Gmo Sgm. However, Hennessy Nerstone Mid is 1.4 times less risky than Gmo Sgm. It trades about 0.05 of its potential returns per unit of risk. Gmo Sgm Major is currently generating about 0.02 per unit of risk. If you would invest 2,068 in Hennessy Nerstone Mid on August 26, 2024 and sell it today you would earn a total of 758.00 from holding Hennessy Nerstone Mid or generate 36.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 31.99% |
| Values | Daily Returns |
Hennessy Nerstone Mid vs. Gmo Sgm Major
Performance |
| Timeline |
| Hennessy Nerstone Mid |
| Gmo Sgm Major |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Hennessy Nerstone and Gmo Sgm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Nerstone and Gmo Sgm
The main advantage of trading using opposite Hennessy Nerstone and Gmo Sgm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Nerstone position performs unexpectedly, Gmo Sgm 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 Gmo Sgm will offset losses from the drop in Gmo Sgm's long position.| Hennessy Nerstone vs. Hennessy Focus Fund | Hennessy Nerstone vs. Small Company Stock Fund | Hennessy Nerstone vs. Large Cap E | Hennessy Nerstone vs. Eventide Gilead Fund |
| Gmo Sgm vs. Amg River Road | Gmo Sgm vs. Hennessy Nerstone Mid | Gmo Sgm vs. Vanguard Small Cap Value | Gmo Sgm vs. Heartland Value Plus |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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