Correlation Between Ivy Natural and Hennessy
Can any of the company-specific risk be diversified away by investing in both Ivy Natural and Hennessy 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 Ivy Natural and Hennessy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ivy Natural Resources and Hennessy Bp Energy, you can compare the effects of market volatilities on Ivy Natural and Hennessy 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 Ivy Natural with a short position of Hennessy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ivy Natural and Hennessy.
Diversification Opportunities for Ivy Natural and Hennessy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ivy and Hennessy is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ivy Natural Resources and Hennessy Bp Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Bp Energy and Ivy Natural 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 Ivy Natural Resources are associated (or correlated) with Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Bp Energy has no effect on the direction of Ivy Natural i.e., Ivy Natural and Hennessy go up and down completely randomly.
Pair Corralation between Ivy Natural and Hennessy
Assuming the 90 days horizon Ivy Natural is expected to generate 2.46 times less return on investment than Hennessy. But when comparing it to its historical volatility, Ivy Natural Resources is 1.53 times less risky than Hennessy. It trades about 0.23 of its potential returns per unit of risk. Hennessy Bp Energy is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 2,588 in Hennessy Bp Energy on September 1, 2024 and sell it today you would earn a total of 271.00 from holding Hennessy Bp Energy or generate 10.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ivy Natural Resources vs. Hennessy Bp Energy
Performance |
| Timeline |
| Ivy Natural Resources |
| Hennessy Bp Energy |
Ivy Natural and Hennessy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ivy Natural and Hennessy
The main advantage of trading using opposite Ivy Natural and Hennessy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ivy Natural position performs unexpectedly, Hennessy 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 Hennessy will offset losses from the drop in Hennessy's long position.| Ivy Natural vs. Ivy Large Cap | Ivy Natural vs. Ivy Small Cap | Ivy Natural vs. Ivy High Income | Ivy Natural vs. Ivy Apollo Multi Asset |
| Hennessy vs. World Energy Fund | Hennessy vs. Ivy Energy Fund | Hennessy vs. Blackrock All Cap Energy | Hennessy vs. Energy Fund Class |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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