Correlation Between Hennessy Cornerstone and Hennessy Japan
Can any of the company-specific risk be diversified away by investing in both Hennessy Cornerstone and Hennessy Japan 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 Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Nerstone Value and Hennessy Japan Fund, you can compare the effects of market volatilities on Hennessy Cornerstone and Hennessy Japan 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 Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Cornerstone and Hennessy Japan.
Diversification Opportunities for Hennessy Cornerstone and Hennessy Japan
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hennessy and Hennessy is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Value and Hennessy Japan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Japan 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 Value are associated (or correlated) with Hennessy Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Japan has no effect on the direction of Hennessy Cornerstone i.e., Hennessy Cornerstone and Hennessy Japan go up and down completely randomly.
Pair Corralation between Hennessy Cornerstone and Hennessy Japan
Assuming the 90 days horizon Hennessy Nerstone Value is expected to generate 0.66 times more return on investment than Hennessy Japan. However, Hennessy Nerstone Value is 1.52 times less risky than Hennessy Japan. It trades about 0.37 of its potential returns per unit of risk. Hennessy Japan Fund is currently generating about 0.1 per unit of risk. If you would invest 2,028 in Hennessy Nerstone Value on November 2, 2024 and sell it today you would earn a total of 104.00 from holding Hennessy Nerstone Value or generate 5.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Hennessy Nerstone Value vs. Hennessy Japan Fund
Performance |
| Timeline |
| Hennessy Nerstone Value |
| Hennessy Japan |
Hennessy Cornerstone and Hennessy Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Cornerstone and Hennessy Japan
The main advantage of trading using opposite Hennessy Cornerstone and Hennessy Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Cornerstone position performs unexpectedly, Hennessy Japan 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 Japan will offset losses from the drop in Hennessy Japan's long position.The idea behind Hennessy Nerstone Value and Hennessy Japan Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Hennessy Japan vs. Hennessy Japan Small | Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Matthews Japan Fund | Hennessy Japan vs. Matthews Japan Fund |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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