Correlation Between Hennessy and Sound Shore
Can any of the company-specific risk be diversified away by investing in both Hennessy and Sound Shore 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 Sound Shore 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 Sound Shore Fund, you can compare the effects of market volatilities on Hennessy and Sound Shore 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 Sound Shore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Sound Shore.
Diversification Opportunities for Hennessy and Sound Shore
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hennessy and Sound is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Sound Shore Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Shore Fund 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 Sound Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Shore Fund has no effect on the direction of Hennessy i.e., Hennessy and Sound Shore go up and down completely randomly.
Pair Corralation between Hennessy and Sound Shore
Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 1.06 times more return on investment than Sound Shore. However, Hennessy is 1.06 times more volatile than Sound Shore Fund. It trades about 0.05 of its potential returns per unit of risk. Sound Shore Fund is currently generating about 0.03 per unit of risk. If you would invest 2,060 in Hennessy Bp Energy on December 11, 2024 and sell it today you would earn a total of 646.00 from holding Hennessy Bp Energy or generate 31.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Bp Energy vs. Sound Shore Fund
Performance |
| Timeline |
| Hennessy Bp Energy |
| Sound Shore Fund |
Hennessy and Sound Shore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy and Sound Shore
The main advantage of trading using opposite Hennessy and Sound Shore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy position performs unexpectedly, Sound Shore 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 Sound Shore will offset losses from the drop in Sound Shore's long position.| Hennessy vs. World Energy Fund | ||
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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