Correlation Between Hennessy Large and Dow 2x
Can any of the company-specific risk be diversified away by investing in both Hennessy Large and Dow 2x 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 Dow 2x 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 Dow 2x Strategy, you can compare the effects of market volatilities on Hennessy Large and Dow 2x 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 Dow 2x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Large and Dow 2x.
Diversification Opportunities for Hennessy Large and Dow 2x
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Dow is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Large Cap and Dow 2x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow 2x Strategy 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 Dow 2x. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow 2x Strategy has no effect on the direction of Hennessy Large i.e., Hennessy Large and Dow 2x go up and down completely randomly.
Pair Corralation between Hennessy Large and Dow 2x
Assuming the 90 days horizon Hennessy Large Cap is expected to generate 1.39 times more return on investment than Dow 2x. However, Hennessy Large is 1.39 times more volatile than Dow 2x Strategy. It trades about 0.24 of its potential returns per unit of risk. Dow 2x Strategy is currently generating about 0.28 per unit of risk. If you would invest 2,784 in Hennessy Large Cap on August 31, 2024 and sell it today you would earn a total of 390.00 from holding Hennessy Large Cap or generate 14.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Large Cap vs. Dow 2x Strategy
Performance |
| Timeline |
| Hennessy Large Cap |
| Dow 2x Strategy |
Hennessy Large and Dow 2x Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Large and Dow 2x
The main advantage of trading using opposite Hennessy Large and Dow 2x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Large position performs unexpectedly, Dow 2x 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 Dow 2x will offset losses from the drop in Dow 2x'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 |
| Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Dow 2x Strategy | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Ultramid Cap Profund Ultramid Cap |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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