Correlation Between Hennessy Technology and Northeast Investors
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and Northeast Investors 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 Northeast Investors 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 Northeast Investors Trust, you can compare the effects of market volatilities on Hennessy Technology and Northeast Investors 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 Northeast Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and Northeast Investors.
Diversification Opportunities for Hennessy Technology and Northeast Investors
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hennessy and Northeast is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Northeast Investors Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast Investors Trust 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 Northeast Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Investors Trust has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Northeast Investors go up and down completely randomly.
Pair Corralation between Hennessy Technology and Northeast Investors
Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 3.74 times more return on investment than Northeast Investors. However, Hennessy Technology is 3.74 times more volatile than Northeast Investors Trust. It trades about -0.03 of its potential returns per unit of risk. Northeast Investors Trust is currently generating about -0.18 per unit of risk. If you would invest 2,384 in Hennessy Technology Fund on September 13, 2024 and sell it today you would lose (29.00) from holding Hennessy Technology Fund or give up 1.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Technology Fund vs. Northeast Investors Trust
Performance |
| Timeline |
| Hennessy Technology |
| Northeast Investors Trust |
Hennessy Technology and Northeast Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and Northeast Investors
The main advantage of trading using opposite Hennessy Technology and Northeast Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, Northeast Investors 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 Northeast Investors will offset losses from the drop in Northeast Investors' 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 |
| Northeast Investors vs. Rational Strategic Allocation | Northeast Investors vs. Dodge Cox Stock | Northeast Investors vs. Morningstar Unconstrained Allocation | Northeast Investors vs. Qs Large Cap |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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