Correlation Between Hennessy Large and Hennessy Small
Can any of the company-specific risk be diversified away by investing in both Hennessy Large and Hennessy Small 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 Hennessy Small 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 Hennessy Small Cap, you can compare the effects of market volatilities on Hennessy Large and Hennessy Small 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 Hennessy Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Large and Hennessy Small.
Diversification Opportunities for Hennessy Large and Hennessy Small
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 Large Cap and Hennessy Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Small Cap 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 Hennessy Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Small Cap has no effect on the direction of Hennessy Large i.e., Hennessy Large and Hennessy Small go up and down completely randomly.
Pair Corralation between Hennessy Large and Hennessy Small
Assuming the 90 days horizon Hennessy Large Cap is expected to generate 0.86 times more return on investment than Hennessy Small. However, Hennessy Large Cap is 1.17 times less risky than Hennessy Small. It trades about 0.24 of its potential returns per unit of risk. Hennessy Small Cap is currently generating about 0.18 per unit of risk. If you would invest 2,793 in Hennessy Large Cap on August 27, 2024 and sell it today you would earn a total of 388.00 from holding Hennessy Large Cap or generate 13.89% 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. Hennessy Small Cap
Performance |
| Timeline |
| Hennessy Large Cap |
| Hennessy Small Cap |
Hennessy Large and Hennessy Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Large and Hennessy Small
The main advantage of trading using opposite Hennessy Large and Hennessy Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Large position performs unexpectedly, Hennessy Small 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 Small will offset losses from the drop in Hennessy Small's long position.| Hennessy Large vs. Hennessy Small Cap | Hennessy Large vs. Hennessy Large Cap | Hennessy Large vs. Baron Real Estate | Hennessy Large vs. Hennessy Focus Fund |
| Hennessy Small vs. Hennessy Large Cap | Hennessy Small vs. Rmb Mendon Financial | Hennessy Small vs. Hennessy Focus Fund | Hennessy Small vs. Rmb Mendon Financial |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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