Correlation Between Hennessy and Capital World
Can any of the company-specific risk be diversified away by investing in both Hennessy and Capital World 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 and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Bp Energy and Capital World Growth, you can compare the effects of market volatilities on Hennessy and Capital World 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 with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Capital World.
Diversification Opportunities for Hennessy and Capital World
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hennessy and Capital is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Hennessy 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 Bp Energy are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Hennessy i.e., Hennessy and Capital World go up and down completely randomly.
Pair Corralation between Hennessy and Capital World
Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 1.97 times more return on investment than Capital World. However, Hennessy is 1.97 times more volatile than Capital World Growth. It trades about 0.37 of its potential returns per unit of risk. Capital World Growth is currently generating about -0.01 per unit of risk. If you would invest 2,580 in Hennessy Bp Energy on August 30, 2024 and sell it today you would earn a total of 269.00 from holding Hennessy Bp Energy or generate 10.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Hennessy Bp Energy vs. Capital World Growth
Performance |
| Timeline |
| Hennessy Bp Energy |
| Capital World Growth |
Hennessy and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy and Capital World
The main advantage of trading using opposite Hennessy and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Hennessy vs. World Energy Fund | Hennessy vs. Ivy Energy Fund | Hennessy vs. Blackrock All Cap Energy | Hennessy vs. Energy Fund Class |
| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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