Correlation Between Hennessy and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Hennessy and Mid Cap 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 Mid Cap 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 Mid Cap Index, you can compare the effects of market volatilities on Hennessy and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Mid Cap.
Diversification Opportunities for Hennessy and Mid Cap
Very poor diversification
The 3 months correlation between Hennessy and Mid is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Index 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 Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Index has no effect on the direction of Hennessy i.e., Hennessy and Mid Cap go up and down completely randomly.
Pair Corralation between Hennessy and Mid Cap
Assuming the 90 days horizon Hennessy Bp Energy is expected to under-perform the Mid Cap. In addition to that, Hennessy is 1.37 times more volatile than Mid Cap Index. It trades about -0.04 of its total potential returns per unit of risk. Mid Cap Index is currently generating about 0.08 per unit of volatility. If you would invest 2,891 in Mid Cap Index on September 15, 2024 and sell it today you would earn a total of 35.00 from holding Mid Cap Index or generate 1.21% 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. Mid Cap Index
Performance |
| Timeline |
| Hennessy Bp Energy |
| Mid Cap Index |
Hennessy and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy and Mid Cap
The main advantage of trading using opposite Hennessy and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| Hennessy vs. World Energy Fund | Hennessy vs. Ivy Energy Fund | Hennessy vs. Blackrock All Cap Energy | Hennessy vs. Energy Fund Class |
| Mid Cap vs. Alpsalerian Energy Infrastructure | Mid Cap vs. Energy Basic Materials | Mid Cap vs. Hennessy Bp Energy | Mid Cap vs. Gmo Resources |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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