Correlation Between Hennessy Technology and Balanced Fund
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and Balanced Fund 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 Balanced Fund 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 Balanced Fund Institutional, you can compare the effects of market volatilities on Hennessy Technology and Balanced Fund 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 Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and Balanced Fund.
Diversification Opportunities for Hennessy Technology and Balanced Fund
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Hennessy and Balanced is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Balanced Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Instit 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 Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Instit has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Balanced Fund go up and down completely randomly.
Pair Corralation between Hennessy Technology and Balanced Fund
Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 2.65 times more return on investment than Balanced Fund. However, Hennessy Technology is 2.65 times more volatile than Balanced Fund Institutional. It trades about 0.04 of its potential returns per unit of risk. Balanced Fund Institutional is currently generating about 0.1 per unit of risk. If you would invest 2,232 in Hennessy Technology Fund on September 12, 2024 and sell it today you would earn a total of 123.00 from holding Hennessy Technology Fund or generate 5.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Hennessy Technology Fund vs. Balanced Fund Institutional
Performance |
| Timeline |
| Hennessy Technology |
| Balanced Fund Instit |
Hennessy Technology and Balanced Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and Balanced Fund
The main advantage of trading using opposite Hennessy Technology and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, Balanced Fund 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 Balanced Fund will offset losses from the drop in Balanced Fund's long position.The idea behind Hennessy Technology Fund and Balanced Fund Institutional pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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