Correlation Between Northern and Hennessy
Can any of the company-specific risk be diversified away by investing in both Northern 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 Northern and Hennessy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northern Quality Esg and Hennessy Bp Energy, you can compare the effects of market volatilities on Northern 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 Northern with a short position of Hennessy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northern and Hennessy.
Diversification Opportunities for Northern and Hennessy
Very weak diversification
The 3 months correlation between Northern and Hennessy is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Northern Quality Esg 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 Northern 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 Northern Quality Esg 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 Northern i.e., Northern and Hennessy go up and down completely randomly.
Pair Corralation between Northern and Hennessy
Assuming the 90 days horizon Northern is expected to generate 8.53 times less return on investment than Hennessy. In addition to that, Northern is 1.59 times more volatile than Hennessy Bp Energy. It trades about 0.09 of its total potential returns per unit of risk. Hennessy Bp Energy is currently generating about 1.2 per unit of volatility. If you would invest 2,575 in Hennessy Bp Energy on October 20, 2024 and sell it today you would earn a total of 356.00 from holding Hennessy Bp Energy or generate 13.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northern Quality Esg vs. Hennessy Bp Energy
Performance |
| Timeline |
| Northern Quality Esg |
| Hennessy Bp Energy |
Northern and Hennessy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northern and Hennessy
The main advantage of trading using opposite Northern and Hennessy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern 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.| Northern vs. Northern Stock Index | Northern vs. Northern Mid Cap | Northern vs. Northern Income Equity | Northern vs. Northern International Equity |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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