Correlation Between Hennessy Technology and Ariel Appreciation
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and Ariel Appreciation 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 Ariel Appreciation 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 Ariel Appreciation Fund, you can compare the effects of market volatilities on Hennessy Technology and Ariel Appreciation 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 Ariel Appreciation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and Ariel Appreciation.
Diversification Opportunities for Hennessy Technology and Ariel Appreciation
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hennessy and Ariel is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Ariel Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Appreciation 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 Ariel Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Appreciation has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Ariel Appreciation go up and down completely randomly.
Pair Corralation between Hennessy Technology and Ariel Appreciation
Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 1.44 times more return on investment than Ariel Appreciation. However, Hennessy Technology is 1.44 times more volatile than Ariel Appreciation Fund. It trades about 0.07 of its potential returns per unit of risk. Ariel Appreciation Fund is currently generating about -0.04 per unit of risk. If you would invest 2,394 in Hennessy Technology Fund on November 22, 2024 and sell it today you would earn a total of 36.00 from holding Hennessy Technology Fund or generate 1.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Technology Fund vs. Ariel Appreciation Fund
Performance |
| Timeline |
| Hennessy Technology |
| Ariel Appreciation |
Hennessy Technology and Ariel Appreciation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and Ariel Appreciation
The main advantage of trading using opposite Hennessy Technology and Ariel Appreciation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, Ariel Appreciation 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 Ariel Appreciation will offset losses from the drop in Ariel Appreciation'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 |
| Ariel Appreciation vs. Riverparknext Century Growth | Ariel Appreciation vs. Oklahoma College Savings | Ariel Appreciation vs. Rational Defensive Growth | Ariel Appreciation vs. Multimanager Lifestyle Growth |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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