Correlation Between NYSE Composite and Hennessy Japan
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Hennessy Japan 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 NYSE Composite and Hennessy Japan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Hennessy Japan Fund, you can compare the effects of market volatilities on NYSE Composite and Hennessy Japan 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 NYSE Composite with a short position of Hennessy Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Hennessy Japan.
Diversification Opportunities for NYSE Composite and Hennessy Japan
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Hennessy is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Hennessy Japan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Japan and NYSE Composite 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 NYSE Composite are associated (or correlated) with Hennessy Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Japan has no effect on the direction of NYSE Composite i.e., NYSE Composite and Hennessy Japan go up and down completely randomly.
Pair Corralation between NYSE Composite and Hennessy Japan
Assuming the 90 days trading horizon NYSE Composite is expected to under-perform the Hennessy Japan. But the index apears to be less risky and, when comparing its historical volatility, NYSE Composite is 1.48 times less risky than Hennessy Japan. The index trades about -0.05 of its potential returns per unit of risk. The Hennessy Japan Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,296 in Hennessy Japan Fund on November 27, 2024 and sell it today you would earn a total of 19.00 from holding Hennessy Japan Fund or generate 0.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Hennessy Japan Fund
Performance |
| Timeline |
NYSE Composite and Hennessy Japan Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Hennessy Japan Fund
Pair trading matchups for Hennessy Japan
Pair Trading with NYSE Composite and Hennessy Japan
The main advantage of trading using opposite NYSE Composite and Hennessy Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Hennessy Japan 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 Japan will offset losses from the drop in Hennessy Japan's long position.| NYSE Composite vs. Unum Group | NYSE Composite vs. Palomar Holdings | NYSE Composite vs. Fidelity National Financial | NYSE Composite vs. ZW Data Action |
| Hennessy Japan vs. Hennessy Japan Fund | Hennessy Japan vs. Hennessy Japan Small | Hennessy Japan vs. Matthews Japan Fund | Hennessy Japan vs. Matthews India 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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