Correlation Between Hennessy Technology and Wilshire 5000
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and Wilshire 5000 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 Wilshire 5000 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 Wilshire 5000 Index, you can compare the effects of market volatilities on Hennessy Technology and Wilshire 5000 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 Wilshire 5000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and Wilshire 5000.
Diversification Opportunities for Hennessy Technology and Wilshire 5000
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Wilshire is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Wilshire 5000 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire 5000 Index 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 Wilshire 5000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire 5000 Index has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Wilshire 5000 go up and down completely randomly.
Pair Corralation between Hennessy Technology and Wilshire 5000
Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 1.58 times more return on investment than Wilshire 5000. However, Hennessy Technology is 1.58 times more volatile than Wilshire 5000 Index. It trades about 0.2 of its potential returns per unit of risk. Wilshire 5000 Index is currently generating about 0.22 per unit of risk. If you would invest 2,274 in Hennessy Technology Fund on August 29, 2024 and sell it today you would earn a total of 138.00 from holding Hennessy Technology Fund or generate 6.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Technology Fund vs. Wilshire 5000 Index
Performance |
| Timeline |
| Hennessy Technology |
| Wilshire 5000 Index |
Hennessy Technology and Wilshire 5000 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and Wilshire 5000
The main advantage of trading using opposite Hennessy Technology and Wilshire 5000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, Wilshire 5000 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 Wilshire 5000 will offset losses from the drop in Wilshire 5000'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 |
| Wilshire 5000 vs. Schwab Total Stock | Wilshire 5000 vs. Vanguard Russell 3000 | Wilshire 5000 vs. iShares Russell 3000 | Wilshire 5000 vs. Large Pany Value |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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