Correlation Between Hennessy and Diamond Hill
Can any of the company-specific risk be diversified away by investing in both Hennessy and Diamond Hill 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 Diamond Hill 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 Diamond Hill Large, you can compare the effects of market volatilities on Hennessy and Diamond Hill 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 Diamond Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Diamond Hill.
Diversification Opportunities for Hennessy and Diamond Hill
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hennessy and Diamond is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Diamond Hill Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Large 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 Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Large has no effect on the direction of Hennessy i.e., Hennessy and Diamond Hill go up and down completely randomly.
Pair Corralation between Hennessy and Diamond Hill
Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 1.24 times more return on investment than Diamond Hill. However, Hennessy is 1.24 times more volatile than Diamond Hill Large. It trades about 0.57 of its potential returns per unit of risk. Diamond Hill Large is currently generating about 0.19 per unit of risk. If you would invest 2,645 in Hennessy Bp Energy on October 25, 2024 and sell it today you would earn a total of 225.00 from holding Hennessy Bp Energy or generate 8.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Bp Energy vs. Diamond Hill Large
Performance |
| Timeline |
| Hennessy Bp Energy |
| Diamond Hill Large |
Hennessy and Diamond Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy and Diamond Hill
The main advantage of trading using opposite Hennessy and Diamond Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy position performs unexpectedly, Diamond Hill 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 Diamond Hill will offset losses from the drop in Diamond Hill's long position.| Hennessy vs. World Energy Fund | Hennessy vs. Ivy Energy Fund | Hennessy vs. Blackrock All Cap Energy | Hennessy vs. Energy Fund Class |
| Diamond Hill vs. Buffalo Small Cap | Diamond Hill vs. Ab Small Cap | Diamond Hill vs. Praxis Small Cap | Diamond Hill vs. Tax Managed Mid 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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