Correlation Between Hennessy Technology and Western Asset
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and Western Asset 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 Western Asset 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 Western Asset Inflation, you can compare the effects of market volatilities on Hennessy Technology and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and Western Asset.
Diversification Opportunities for Hennessy Technology and Western Asset
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hennessy and Western is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Western Asset Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Inflation 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Inflation has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Western Asset go up and down completely randomly.
Pair Corralation between Hennessy Technology and Western Asset
Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 3.75 times more return on investment than Western Asset. However, Hennessy Technology is 3.75 times more volatile than Western Asset Inflation. It trades about 0.12 of its potential returns per unit of risk. Western Asset Inflation is currently generating about -0.04 per unit of risk. If you would invest 2,205 in Hennessy Technology Fund on August 31, 2024 and sell it today you would earn a total of 178.00 from holding Hennessy Technology Fund or generate 8.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Technology Fund vs. Western Asset Inflation
Performance |
| Timeline |
| Hennessy Technology |
| Western Asset Inflation |
Hennessy Technology and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and Western Asset
The main advantage of trading using opposite Hennessy Technology and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset'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 |
| Western Asset vs. Vanguard Inflation Protected Securities | Western Asset vs. Vanguard Inflation Protected Securities | Western Asset vs. American Funds Inflation | Western Asset vs. American Funds Inflation |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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