Correlation Between Hennessy and Energy Basic
Can any of the company-specific risk be diversified away by investing in both Hennessy and Energy Basic 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 Energy Basic 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 Energy Basic Materials, you can compare the effects of market volatilities on Hennessy and Energy Basic 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 Energy Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Energy Basic.
Diversification Opportunities for Hennessy and Energy Basic
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hennessy and Energy is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Energy Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Basic Materials 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 Energy Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Basic Materials has no effect on the direction of Hennessy i.e., Hennessy and Energy Basic go up and down completely randomly.
Pair Corralation between Hennessy and Energy Basic
Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 1.27 times more return on investment than Energy Basic. However, Hennessy is 1.27 times more volatile than Energy Basic Materials. It trades about 0.07 of its potential returns per unit of risk. Energy Basic Materials is currently generating about 0.02 per unit of risk. If you would invest 2,377 in Hennessy Bp Energy on August 24, 2024 and sell it today you would earn a total of 477.00 from holding Hennessy Bp Energy or generate 20.07% 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. Energy Basic Materials
Performance |
| Timeline |
| Hennessy Bp Energy |
| Energy Basic Materials |
Hennessy and Energy Basic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy and Energy Basic
The main advantage of trading using opposite Hennessy and Energy Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy position performs unexpectedly, Energy Basic 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 Energy Basic will offset losses from the drop in Energy Basic's long position.| Hennessy vs. Vanguard Energy Fund | Hennessy vs. Vanguard Energy Index | Hennessy vs. Fidelity Select Portfolios | Hennessy vs. Fidelity Advisor Energy |
| Energy Basic vs. Prudential Health Sciences | Energy Basic vs. The Hartford Healthcare | Energy Basic vs. Allianzgi Health Sciences | Energy Basic vs. Alphacentric Lifesci Healthcare |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Stocks Directory Find actively traded stocks across global markets | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |