Correlation Between Microsoft and Hennessy Focus
Can any of the company-specific risk be diversified away by investing in both Microsoft and Hennessy Focus 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 Microsoft and Hennessy Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Hennessy Focus Fund, you can compare the effects of market volatilities on Microsoft and Hennessy Focus 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 Microsoft with a short position of Hennessy Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Hennessy Focus.
Diversification Opportunities for Microsoft and Hennessy Focus
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Microsoft and Hennessy is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hennessy Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Focus and Microsoft 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 Microsoft are associated (or correlated) with Hennessy Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Focus has no effect on the direction of Microsoft i.e., Microsoft and Hennessy Focus go up and down completely randomly.
Pair Corralation between Microsoft and Hennessy Focus
Given the investment horizon of 90 days Microsoft is expected to generate 3.85 times less return on investment than Hennessy Focus. But when comparing it to its historical volatility, Microsoft is 1.12 times less risky than Hennessy Focus. It trades about 0.01 of its potential returns per unit of risk. Hennessy Focus Fund is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 4,317 in Hennessy Focus Fund on November 5, 2024 and sell it today you would earn a total of 158.00 from holding Hennessy Focus Fund or generate 3.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Hennessy Focus Fund
Performance |
| Timeline |
| Microsoft |
| Hennessy Focus |
Microsoft and Hennessy Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Hennessy Focus
The main advantage of trading using opposite Microsoft and Hennessy Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Hennessy Focus 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 Focus will offset losses from the drop in Hennessy Focus' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Hennessy Focus vs. Hennessy Nerstone Mid | Hennessy Focus vs. Amg Yacktman Focused | Hennessy Focus vs. Parnassus Endeavor Fund | Hennessy Focus vs. Hennessy Small Cap |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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