Correlation Between Hennessy and Pear Tree
Can any of the company-specific risk be diversified away by investing in both Hennessy and Pear Tree 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 Pear Tree 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 Pear Tree Polaris, you can compare the effects of market volatilities on Hennessy and Pear Tree 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 Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Pear Tree.
Diversification Opportunities for Hennessy and Pear Tree
Very poor diversification
The 3 months correlation between Hennessy and Pear is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris 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 Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Hennessy i.e., Hennessy and Pear Tree go up and down completely randomly.
Pair Corralation between Hennessy and Pear Tree
Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 0.76 times more return on investment than Pear Tree. However, Hennessy Bp Energy is 1.32 times less risky than Pear Tree. It trades about 0.45 of its potential returns per unit of risk. Pear Tree Polaris is currently generating about 0.26 per unit of risk. If you would invest 2,561 in Hennessy Bp Energy on September 2, 2024 and sell it today you would earn a total of 311.00 from holding Hennessy Bp Energy or generate 12.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Bp Energy vs. Pear Tree Polaris
Performance |
| Timeline |
| Hennessy Bp Energy |
| Pear Tree Polaris |
Hennessy and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy and Pear Tree
The main advantage of trading using opposite Hennessy and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree's long position.| Hennessy vs. World Energy Fund | Hennessy vs. Ivy Energy Fund | Hennessy vs. Blackrock All Cap Energy | Hennessy vs. Energy Fund Class |
| Pear Tree vs. Volumetric Fund Volumetric | Pear Tree vs. Shelton Funds | Pear Tree vs. Nasdaq 100 Index Fund | Pear Tree vs. Balanced Fund Investor |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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