Correlation Between Hennessy Technology and State Street
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and State Street 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 State Street 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 State Street Equity, you can compare the effects of market volatilities on Hennessy Technology and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and State Street.
Diversification Opportunities for Hennessy Technology and State Street
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and State is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and State Street Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Equity has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and State Street go up and down completely randomly.
Pair Corralation between Hennessy Technology and State Street
Assuming the 90 days horizon Hennessy Technology Fund is expected to under-perform the State Street. In addition to that, Hennessy Technology is 1.62 times more volatile than State Street Equity. It trades about -0.02 of its total potential returns per unit of risk. State Street Equity is currently generating about -0.02 per unit of volatility. If you would invest 54,362 in State Street Equity on November 27, 2024 and sell it today you would lose (208.00) from holding State Street Equity or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Technology Fund vs. State Street Equity
Performance |
| Timeline |
| Hennessy Technology |
| State Street Equity |
Hennessy Technology and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and State Street
The main advantage of trading using opposite Hennessy Technology and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street'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 |
| State Street vs. Prudential Government Money | State Street vs. Us Government Securities | State Street vs. Blackrock Government Bond | State Street vs. Us Government Securities |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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