Correlation Between Hennessy Technology and New Perspective
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and New Perspective 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 New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Hennessy Technology and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and New Perspective.
Diversification Opportunities for Hennessy Technology and New Perspective
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hennessy and New is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and New Perspective go up and down completely randomly.
Pair Corralation between Hennessy Technology and New Perspective
Assuming the 90 days horizon Hennessy Technology Fund is expected to under-perform the New Perspective. In addition to that, Hennessy Technology is 1.67 times more volatile than New Perspective Fund. It trades about -0.08 of its total potential returns per unit of risk. New Perspective Fund is currently generating about -0.01 per unit of volatility. If you would invest 6,464 in New Perspective Fund on November 29, 2024 and sell it today you would lose (14.00) from holding New Perspective Fund or give up 0.22% 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. New Perspective Fund
Performance |
| Timeline |
| Hennessy Technology |
| New Perspective |
Hennessy Technology and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and New Perspective
The main advantage of trading using opposite Hennessy Technology and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective'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 |
| New Perspective vs. Tax Free Conservative Income | New Perspective vs. Calvert Conservative Allocation | New Perspective vs. Harbor Diversified International | New Perspective vs. Manning Napier Diversified |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |