Correlation Between Hennessy Large and Financial Industries
Can any of the company-specific risk be diversified away by investing in both Hennessy Large and Financial Industries 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 Financial Industries 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 Financial Industries Fund, you can compare the effects of market volatilities on Hennessy Large and Financial Industries 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 Financial Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Large and Financial Industries.
Diversification Opportunities for Hennessy Large and Financial Industries
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Hennessy and FINANCIAL is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Large Cap and Financial Industries Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Financial Industries 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 Financial Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Financial Industries has no effect on the direction of Hennessy Large i.e., Hennessy Large and Financial Industries go up and down completely randomly.
Pair Corralation between Hennessy Large and Financial Industries
Assuming the 90 days horizon Hennessy Large Cap is expected to generate 1.44 times more return on investment than Financial Industries. However, Hennessy Large is 1.44 times more volatile than Financial Industries Fund. It trades about 0.22 of its potential returns per unit of risk. Financial Industries Fund is currently generating about 0.25 per unit of risk. If you would invest 2,825 in Hennessy Large Cap on August 29, 2024 and sell it today you would earn a total of 372.00 from holding Hennessy Large Cap or generate 13.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Hennessy Large Cap vs. Financial Industries Fund
Performance |
Timeline |
Hennessy Large Cap |
Financial Industries |
Hennessy Large and Financial Industries Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hennessy Large and Financial Industries
The main advantage of trading using opposite Hennessy Large and Financial Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Large position performs unexpectedly, Financial Industries 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 Financial Industries will offset losses from the drop in Financial Industries' long position.Hennessy Large vs. T Rowe Price | Hennessy Large vs. HUMANA INC | Hennessy Large vs. Aquagold International | Hennessy Large vs. Barloworld Ltd ADR |
Financial Industries vs. T Rowe Price | Financial Industries vs. HUMANA INC | Financial Industries vs. Aquagold International | Financial Industries vs. Barloworld Ltd ADR |
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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