Correlation Between NYSE Composite and Hennessy Small
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Hennessy Small 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 Small 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 Small Cap, you can compare the effects of market volatilities on NYSE Composite and Hennessy Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Hennessy Small.
Diversification Opportunities for NYSE Composite and Hennessy Small
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Hennessy is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Hennessy Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Small Cap 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 Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Small Cap has no effect on the direction of NYSE Composite i.e., NYSE Composite and Hennessy Small go up and down completely randomly.
Pair Corralation between NYSE Composite and Hennessy Small
Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.99 times less return on investment than Hennessy Small. But when comparing it to its historical volatility, NYSE Composite is 2.91 times less risky than Hennessy Small. It trades about 0.15 of its potential returns per unit of risk. Hennessy Small Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,253 in Hennessy Small Cap on August 28, 2024 and sell it today you would earn a total of 964.00 from holding Hennessy Small Cap or generate 42.79% 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 Small Cap
Performance |
| Timeline |
NYSE Composite and Hennessy Small Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Hennessy Small Cap
Pair trading matchups for Hennessy Small
Pair Trading with NYSE Composite and Hennessy Small
The main advantage of trading using opposite NYSE Composite and Hennessy Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Hennessy Small 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 Small will offset losses from the drop in Hennessy Small's long position.| NYSE Composite vs. Vita Coco | NYSE Composite vs. Franklin Wireless Corp | NYSE Composite vs. Ambev SA ADR | NYSE Composite vs. Toro Co |
| Hennessy Small vs. Hennessy Large Cap | Hennessy Small vs. Rmb Mendon Financial | Hennessy Small vs. Hennessy Focus Fund | Hennessy Small vs. Rmb Mendon Financial |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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