Correlation Between Hennessy Technology and Alger Smidcap
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and Alger Smidcap 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 Technology and Alger Smidcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Technology Fund and Alger Smidcap Focus, you can compare the effects of market volatilities on Hennessy Technology and Alger Smidcap 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 Technology with a short position of Alger Smidcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and Alger Smidcap.
Diversification Opportunities for Hennessy Technology and Alger Smidcap
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Alger is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Alger Smidcap Focus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Smidcap Focus and Hennessy Technology 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 Technology Fund are associated (or correlated) with Alger Smidcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Smidcap Focus has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Alger Smidcap go up and down completely randomly.
Pair Corralation between Hennessy Technology and Alger Smidcap
Assuming the 90 days horizon Hennessy Technology is expected to generate 1.22 times less return on investment than Alger Smidcap. But when comparing it to its historical volatility, Hennessy Technology Fund is 1.18 times less risky than Alger Smidcap. It trades about 0.21 of its potential returns per unit of risk. Alger Smidcap Focus is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,448 in Alger Smidcap Focus on October 24, 2024 and sell it today you would earn a total of 76.00 from holding Alger Smidcap Focus or generate 5.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Technology Fund vs. Alger Smidcap Focus
Performance |
| Timeline |
| Hennessy Technology |
| Alger Smidcap Focus |
Hennessy Technology and Alger Smidcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and Alger Smidcap
The main advantage of trading using opposite Hennessy Technology and Alger Smidcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, Alger Smidcap 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 Alger Smidcap will offset losses from the drop in Alger Smidcap's long position.| Hennessy Technology vs. Black Oak Emerging | Hennessy Technology vs. Hennessy Large Cap | Hennessy Technology vs. Hennessy Japan Fund | Hennessy Technology vs. Hennessy Small Cap |
| Alger Smidcap vs. Tax Free Conservative Income | Alger Smidcap vs. Delaware Limited Term Diversified | Alger Smidcap vs. T Rowe Price | Alger Smidcap vs. Allianzgi Diversified Income |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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