Correlation Between Hennessy Small and Hennessy Equity
Can any of the company-specific risk be diversified away by investing in both Hennessy Small and Hennessy Equity 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 Small and Hennessy Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Small Cap and Hennessy Equity And, you can compare the effects of market volatilities on Hennessy Small and Hennessy Equity 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 Small with a short position of Hennessy Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Small and Hennessy Equity.
Diversification Opportunities for Hennessy Small and Hennessy Equity
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Hennessy and Hennessy is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Small Cap and Hennessy Equity And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Equity And and Hennessy Small 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 Small Cap are associated (or correlated) with Hennessy Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Equity And has no effect on the direction of Hennessy Small i.e., Hennessy Small and Hennessy Equity go up and down completely randomly.
Pair Corralation between Hennessy Small and Hennessy Equity
Assuming the 90 days horizon Hennessy Small Cap is expected to generate 6.3 times more return on investment than Hennessy Equity. However, Hennessy Small is 6.3 times more volatile than Hennessy Equity And. It trades about 0.2 of its potential returns per unit of risk. Hennessy Equity And is currently generating about 0.39 per unit of risk. If you would invest 1,589 in Hennessy Small Cap on September 1, 2024 and sell it today you would earn a total of 211.00 from holding Hennessy Small Cap or generate 13.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Hennessy Small Cap vs. Hennessy Equity And
Performance |
| Timeline |
| Hennessy Small Cap |
| Hennessy Equity And |
Hennessy Small and Hennessy Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Small and Hennessy Equity
The main advantage of trading using opposite Hennessy Small and Hennessy Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Small position performs unexpectedly, Hennessy Equity 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 Equity will offset losses from the drop in Hennessy Equity's long position.| Hennessy Small vs. Hennessy Technology Fund | Hennessy Small vs. Icon Information Technology | Hennessy Small vs. Goldman Sachs Technology | Hennessy Small vs. Towpath Technology |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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