Correlation Between Hennessy Technology and Invesco Technology
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and Invesco Technology 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 Invesco Technology 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 Invesco Technology Fund, you can compare the effects of market volatilities on Hennessy Technology and Invesco Technology 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 Invesco Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and Invesco Technology.
Diversification Opportunities for Hennessy Technology and Invesco Technology
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Invesco is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Invesco Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Technology 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 Invesco Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Technology has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Invesco Technology go up and down completely randomly.
Pair Corralation between Hennessy Technology and Invesco Technology
Assuming the 90 days horizon Hennessy Technology is expected to generate 1.52 times less return on investment than Invesco Technology. But when comparing it to its historical volatility, Hennessy Technology Fund is 1.19 times less risky than Invesco Technology. It trades about 0.07 of its potential returns per unit of risk. Invesco Technology Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,979 in Invesco Technology Fund on August 24, 2024 and sell it today you would earn a total of 3,234 from holding Invesco Technology Fund or generate 81.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Hennessy Technology Fund vs. Invesco Technology Fund
Performance |
| Timeline |
| Hennessy Technology |
| Invesco Technology |
Hennessy Technology and Invesco Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and Invesco Technology
The main advantage of trading using opposite Hennessy Technology and Invesco Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, Invesco Technology 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 Invesco Technology will offset losses from the drop in Invesco Technology'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 |
| Invesco Technology vs. Vanguard Information Technology | Invesco Technology vs. Technology Portfolio Technology | Invesco Technology vs. Fidelity Select Semiconductors | Invesco Technology vs. Software And It |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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