Correlation Between Hennessy Large and Hennessy Focus
Can any of the company-specific risk be diversified away by investing in both Hennessy Large and Hennessy Focus 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 Large and Hennessy Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Large Cap and Hennessy Focus Fund, you can compare the effects of market volatilities on Hennessy Large and Hennessy Focus 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 Large with a short position of Hennessy Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Large and Hennessy Focus.
Diversification Opportunities for Hennessy Large and Hennessy Focus
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hennessy and HENNESSY is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Large Cap and Hennessy Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Focus and Hennessy Large 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 Large Cap are associated (or correlated) with Hennessy Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Focus has no effect on the direction of Hennessy Large i.e., Hennessy Large and Hennessy Focus go up and down completely randomly.
Pair Corralation between Hennessy Large and Hennessy Focus
Assuming the 90 days horizon Hennessy Large Cap is expected to under-perform the Hennessy Focus. But the mutual fund apears to be less risky and, when comparing its historical volatility, Hennessy Large Cap is 1.3 times less risky than Hennessy Focus. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Hennessy Focus Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,469 in Hennessy Focus Fund on November 29, 2024 and sell it today you would earn a total of 96.00 from holding Hennessy Focus Fund or generate 2.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Large Cap vs. Hennessy Focus Fund
Performance |
| Timeline |
| Hennessy Large Cap |
| Hennessy Focus |
Hennessy Large and Hennessy Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Large and Hennessy Focus
The main advantage of trading using opposite Hennessy Large and Hennessy Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Large position performs unexpectedly, Hennessy Focus 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 Focus will offset losses from the drop in Hennessy Focus' long position.| Hennessy Large vs. Hennessy Large Cap | Hennessy Large vs. Dow 2x Strategy | Hennessy Large vs. Dow 2x Strategy | Hennessy Large vs. T Rowe Price |
| Hennessy Focus vs. Hennessy Nerstone Mid | Hennessy Focus vs. Amg Yacktman Focused | Hennessy Focus vs. Parnassus Endeavor Fund | Hennessy Focus vs. Hennessy Small Cap |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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