Correlation Between Hennessy Japan and Wasatch Emerging
Can any of the company-specific risk be diversified away by investing in both Hennessy Japan and Wasatch Emerging 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 Wasatch Emerging 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 Wasatch Emerging India, you can compare the effects of market volatilities on Hennessy Japan and Wasatch Emerging 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 Wasatch Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Japan and Wasatch Emerging.
Diversification Opportunities for Hennessy Japan and Wasatch Emerging
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hennessy and Wasatch is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Japan Fund and Wasatch Emerging India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Emerging India 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 Wasatch Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Emerging India has no effect on the direction of Hennessy Japan i.e., Hennessy Japan and Wasatch Emerging go up and down completely randomly.
Pair Corralation between Hennessy Japan and Wasatch Emerging
Assuming the 90 days horizon Hennessy Japan Fund is expected to generate 1.08 times more return on investment than Wasatch Emerging. However, Hennessy Japan is 1.08 times more volatile than Wasatch Emerging India. It trades about 0.08 of its potential returns per unit of risk. Wasatch Emerging India is currently generating about -0.06 per unit of risk. If you would invest 4,499 in Hennessy Japan Fund on August 26, 2024 and sell it today you would earn a total of 71.00 from holding Hennessy Japan Fund or generate 1.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Japan Fund vs. Wasatch Emerging India
Performance |
| Timeline |
| Hennessy Japan |
| Wasatch Emerging India |
Hennessy Japan and Wasatch Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Japan and Wasatch Emerging
The main advantage of trading using opposite Hennessy Japan and Wasatch Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Japan position performs unexpectedly, Wasatch Emerging 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 Wasatch Emerging will offset losses from the drop in Wasatch Emerging's 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 |
| Wasatch Emerging vs. Matthews India Fund | Wasatch Emerging vs. Wasatch Emerging Markets | Wasatch Emerging vs. Wasatch Emerging Markets | Wasatch Emerging vs. iShares MSCI India |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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