Correlation Between Small-cap Value and Hennessy Cornerstone
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Hennessy Cornerstone 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 Small-cap Value and Hennessy Cornerstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Series and Hennessy Nerstone Mid, you can compare the effects of market volatilities on Small-cap Value and Hennessy Cornerstone 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 Small-cap Value with a short position of Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Hennessy Cornerstone.
Diversification Opportunities for Small-cap Value and Hennessy Cornerstone
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small-cap and Hennessy is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Hennessy Nerstone Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Mid and Small-cap Value 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 Small Cap Value Series are associated (or correlated) with Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Mid has no effect on the direction of Small-cap Value i.e., Small-cap Value and Hennessy Cornerstone go up and down completely randomly.
Pair Corralation between Small-cap Value and Hennessy Cornerstone
Assuming the 90 days horizon Small-cap Value is expected to generate 1.15 times less return on investment than Hennessy Cornerstone. But when comparing it to its historical volatility, Small Cap Value Series is 1.09 times less risky than Hennessy Cornerstone. It trades about 0.1 of its potential returns per unit of risk. Hennessy Nerstone Mid is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,417 in Hennessy Nerstone Mid on September 1, 2024 and sell it today you would earn a total of 482.00 from holding Hennessy Nerstone Mid or generate 19.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Small Cap Value Series vs. Hennessy Nerstone Mid
Performance |
| Timeline |
| Small Cap Value |
| Hennessy Nerstone Mid |
Small-cap Value and Hennessy Cornerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Hennessy Cornerstone
The main advantage of trading using opposite Small-cap Value and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Hennessy Cornerstone 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 Cornerstone will offset losses from the drop in Hennessy Cornerstone's long position.| Small-cap Value vs. Franklin Real Estate | Small-cap Value vs. Tiaa Cref Real Estate | Small-cap Value vs. Pender Real Estate | Small-cap Value vs. Jhancock Real Estate |
| Hennessy Cornerstone vs. Hennessy Focus Fund | Hennessy Cornerstone vs. Small Company Stock Fund | Hennessy Cornerstone vs. Large Cap E | Hennessy Cornerstone vs. Eventide Gilead Fund |
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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