Correlation Between Small Cap and Hennessy Nerstone
Can any of the company-specific risk be diversified away by investing in both Small Cap and Hennessy Nerstone 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 and Hennessy Nerstone 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 and Hennessy Nerstone 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 with a short position of Hennessy Nerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Hennessy Nerstone.
Diversification Opportunities for Small Cap and Hennessy Nerstone
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Hennessy is 0.87. 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 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 Nerstone. 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 i.e., Small Cap and Hennessy Nerstone go up and down completely randomly.
Pair Corralation between Small Cap and Hennessy Nerstone
Assuming the 90 days horizon Small Cap Value Series is expected to generate 1.35 times more return on investment than Hennessy Nerstone. However, Small Cap is 1.35 times more volatile than Hennessy Nerstone Mid. It trades about 0.32 of its potential returns per unit of risk. Hennessy Nerstone Mid is currently generating about 0.33 per unit of risk. If you would invest 1,687 in Small Cap Value Series on August 28, 2024 and sell it today you would earn a total of 193.00 from holding Small Cap Value Series or generate 11.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Series vs. Hennessy Nerstone Mid
Performance |
| Timeline |
| Small Cap Value |
| Hennessy Nerstone Mid |
Small Cap and Hennessy Nerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Hennessy Nerstone
The main advantage of trading using opposite Small Cap and Hennessy Nerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Hennessy Nerstone 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 Nerstone will offset losses from the drop in Hennessy Nerstone's long position.| Small Cap vs. Lord Abbett Trust | Small Cap vs. Lord Abbett Trust | Small Cap vs. Floating Rate Fund | Small Cap vs. Lord Abbett Inv |
| Hennessy Nerstone vs. Hennessy Focus Fund | Hennessy Nerstone vs. Small Company Stock Fund | Hennessy Nerstone vs. Large Cap E | Hennessy Nerstone 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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