Correlation Between Hennessy and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Hennessy and Wells Fargo 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 Wells Fargo 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 Wells Fargo Ultra, you can compare the effects of market volatilities on Hennessy and Wells Fargo 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 Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Wells Fargo.
Diversification Opportunities for Hennessy and Wells Fargo
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hennessy and Wells is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Wells Fargo Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Ultra 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 Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Ultra has no effect on the direction of Hennessy i.e., Hennessy and Wells Fargo go up and down completely randomly.
Pair Corralation between Hennessy and Wells Fargo
Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 11.74 times more return on investment than Wells Fargo. However, Hennessy is 11.74 times more volatile than Wells Fargo Ultra. It trades about 0.08 of its potential returns per unit of risk. Wells Fargo Ultra is currently generating about 0.26 per unit of risk. If you would invest 2,291 in Hennessy Bp Energy on September 4, 2024 and sell it today you would earn a total of 581.00 from holding Hennessy Bp Energy or generate 25.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Bp Energy vs. Wells Fargo Ultra
Performance |
| Timeline |
| Hennessy Bp Energy |
| Wells Fargo Ultra |
Hennessy and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy and Wells Fargo
The main advantage of trading using opposite Hennessy and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| Hennessy vs. World Energy Fund | Hennessy vs. Ivy Energy Fund | Hennessy vs. Blackrock All Cap Energy | Hennessy vs. Energy Fund Class |
| Wells Fargo vs. Hennessy Bp Energy | Wells Fargo vs. Firsthand Alternative Energy | Wells Fargo vs. Jennison Natural Resources | Wells Fargo vs. Fidelity Advisor Energy |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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