Correlation Between Hennessy Japan and Frontier Markets
Can any of the company-specific risk be diversified away by investing in both Hennessy Japan and Frontier Markets 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 Japan and Frontier Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Japan Fund and Frontier Markets Portfolio, you can compare the effects of market volatilities on Hennessy Japan and Frontier Markets 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 Japan with a short position of Frontier Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Japan and Frontier Markets.
Diversification Opportunities for Hennessy Japan and Frontier Markets
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hennessy and Frontier is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Japan Fund and Frontier Markets Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Markets Por and Hennessy Japan 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 Japan Fund are associated (or correlated) with Frontier Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Markets Por has no effect on the direction of Hennessy Japan i.e., Hennessy Japan and Frontier Markets go up and down completely randomly.
Pair Corralation between Hennessy Japan and Frontier Markets
Assuming the 90 days horizon Hennessy Japan Fund is expected to generate 1.83 times more return on investment than Frontier Markets. However, Hennessy Japan is 1.83 times more volatile than Frontier Markets Portfolio. It trades about 0.07 of its potential returns per unit of risk. Frontier Markets Portfolio is currently generating about 0.06 per unit of risk. If you would invest 3,172 in Hennessy Japan Fund on September 12, 2024 and sell it today you would earn a total of 1,392 from holding Hennessy Japan Fund or generate 43.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Japan Fund vs. Frontier Markets Portfolio
Performance |
| Timeline |
| Hennessy Japan |
| Frontier Markets Por |
Hennessy Japan and Frontier Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Japan and Frontier Markets
The main advantage of trading using opposite Hennessy Japan and Frontier Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Japan position performs unexpectedly, Frontier Markets 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 Frontier Markets will offset losses from the drop in Frontier Markets' long position.| Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Hennessy Japan Small | Hennessy Japan vs. Matthews Japan Fund | Hennessy Japan vs. Matthews India Fund |
| Frontier Markets vs. Frontier Markets Portfolio | Frontier Markets vs. Hennessy Japan Fund | Frontier Markets vs. Hennessy Japan Fund | Frontier Markets vs. Hennessy Japan Small |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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