Correlation Between Hennessy and Global Small
Can any of the company-specific risk be diversified away by investing in both Hennessy and Global 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 and Global Small 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 Global Small, you can compare the effects of market volatilities on Hennessy and Global 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 with a short position of Global Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Global Small.
Diversification Opportunities for Hennessy and Global Small
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Global is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Global Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Small 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 Global Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Small has no effect on the direction of Hennessy i.e., Hennessy and Global Small go up and down completely randomly.
Pair Corralation between Hennessy and Global Small
Assuming the 90 days horizon Hennessy is expected to generate 1.5 times less return on investment than Global Small. In addition to that, Hennessy is 1.21 times more volatile than Global Small. It trades about 0.06 of its total potential returns per unit of risk. Global Small is currently generating about 0.1 per unit of volatility. If you would invest 1,483 in Global Small on September 13, 2024 and sell it today you would earn a total of 188.00 from holding Global Small or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Hennessy Bp Energy vs. Global Small
Performance |
| Timeline |
| Hennessy Bp Energy |
| Global Small |
Hennessy and Global Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy and Global Small
The main advantage of trading using opposite Hennessy and Global Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy position performs unexpectedly, Global 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 Global Small will offset losses from the drop in Global Small's long position.| Hennessy vs. World Energy Fund | Hennessy vs. Blackrock All Cap Energy | Hennessy vs. Energy Fund Class | Hennessy vs. Fidelity Advisor Energy |
| Global Small vs. Intal High Relative | Global Small vs. Dfa International | Global Small vs. Dfa Inflation Protected | Global Small vs. Dfa International 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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