Correlation Between Hennessy Japan and Hennessy Cornerstone
Can any of the company-specific risk be diversified away by investing in both Hennessy Japan and Hennessy Cornerstone 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 Hennessy Cornerstone 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 Hennessy Nerstone Growth, you can compare the effects of market volatilities on Hennessy Japan and Hennessy Cornerstone 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 Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Japan and Hennessy Cornerstone.
Diversification Opportunities for Hennessy Japan and Hennessy Cornerstone
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Hennessy is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Japan Fund and Hennessy Nerstone Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Growth 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 Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Growth has no effect on the direction of Hennessy Japan i.e., Hennessy Japan and Hennessy Cornerstone go up and down completely randomly.
Pair Corralation between Hennessy Japan and Hennessy Cornerstone
Assuming the 90 days horizon Hennessy Japan is expected to generate 1.45 times less return on investment than Hennessy Cornerstone. But when comparing it to its historical volatility, Hennessy Japan Fund is 1.31 times less risky than Hennessy Cornerstone. It trades about 0.1 of its potential returns per unit of risk. Hennessy Nerstone Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,329 in Hennessy Nerstone Growth on November 2, 2024 and sell it today you would earn a total of 91.00 from holding Hennessy Nerstone Growth or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Japan Fund vs. Hennessy Nerstone Growth
Performance |
| Timeline |
| Hennessy Japan |
| Hennessy Nerstone Growth |
Hennessy Japan and Hennessy Cornerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Japan and Hennessy Cornerstone
The main advantage of trading using opposite Hennessy Japan and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Japan position performs unexpectedly, Hennessy Cornerstone 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 Cornerstone will offset losses from the drop in Hennessy Cornerstone's long position.| Hennessy Japan vs. Hennessy Japan Small | Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Matthews Japan Fund | Hennessy Japan vs. Matthews Japan Fund |
| Hennessy Cornerstone vs. Ultramid Cap Profund Ultramid Cap | Hennessy Cornerstone vs. Fpa Queens Road | Hennessy Cornerstone vs. Vanguard Small Cap Value | Hennessy Cornerstone vs. William Blair 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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