Correlation Between Hennessy Technology and Small Cap
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and Small 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 Technology and Small Cap 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 Small Cap Equity, you can compare the effects of market volatilities on Hennessy Technology and Small 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 Technology with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and Small Cap.
Diversification Opportunities for Hennessy Technology and Small Cap
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Hennessy and Small is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Small Cap go up and down completely randomly.
Pair Corralation between Hennessy Technology and Small Cap
Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 1.01 times more return on investment than Small Cap. However, Hennessy Technology is 1.01 times more volatile than Small Cap Equity. It trades about 0.08 of its potential returns per unit of risk. Small Cap Equity is currently generating about 0.04 per unit of risk. If you would invest 1,537 in Hennessy Technology Fund on August 27, 2024 and sell it today you would earn a total of 840.00 from holding Hennessy Technology Fund or generate 54.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Technology Fund vs. Small Cap Equity
Performance |
| Timeline |
| Hennessy Technology |
| Small Cap Equity |
Hennessy Technology and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and Small Cap
The main advantage of trading using opposite Hennessy Technology and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, Small 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 Small Cap will offset losses from the drop in Small Cap'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 |
| Small Cap vs. Dreyfus Technology Growth | Small Cap vs. Invesco Technology Fund | Small Cap vs. Allianzgi Technology Fund | Small Cap vs. Hennessy Technology Fund |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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