Correlation Between Hennessy Cornerstone and Hennessy Small
Can any of the company-specific risk be diversified away by investing in both Hennessy Cornerstone 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 Cornerstone 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 Nerstone Mid and Hennessy Small Cap, you can compare the effects of market volatilities on Hennessy Cornerstone 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 Cornerstone with a short position of Hennessy Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Cornerstone and Hennessy Small.
Diversification Opportunities for Hennessy Cornerstone and Hennessy Small
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Hennessy is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Mid 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 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 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 Cornerstone i.e., Hennessy Cornerstone and Hennessy Small go up and down completely randomly.
Pair Corralation between Hennessy Cornerstone and Hennessy Small
Assuming the 90 days horizon Hennessy Cornerstone is expected to generate 1.01 times less return on investment than Hennessy Small. But when comparing it to its historical volatility, Hennessy Nerstone Mid is 1.38 times less risky than Hennessy Small. It trades about 0.11 of its potential returns per unit of risk. Hennessy Small Cap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,161 in Hennessy Small Cap on September 1, 2024 and sell it today you would earn a total of 995.00 from holding Hennessy Small Cap or generate 46.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Hennessy Nerstone Mid vs. Hennessy Small Cap
Performance |
| Timeline |
| Hennessy Nerstone Mid |
| Hennessy Small Cap |
Hennessy Cornerstone and Hennessy Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Cornerstone and Hennessy Small
The main advantage of trading using opposite Hennessy Cornerstone and Hennessy Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Cornerstone 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 Cornerstone vs. Hennessy Focus Fund | Hennessy Cornerstone vs. Small Company Stock Fund | Hennessy Cornerstone vs. Large Cap E | Hennessy Cornerstone vs. Eventide Gilead Fund |
| 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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