Correlation Between Royce Opportunity and Hennessy Technology
Can any of the company-specific risk be diversified away by investing in both Royce Opportunity and Hennessy Technology 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 Royce Opportunity and Hennessy Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Royce Opportunity Fund and Hennessy Technology Fund, you can compare the effects of market volatilities on Royce Opportunity and Hennessy Technology 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 Royce Opportunity with a short position of Hennessy Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Opportunity and Hennessy Technology.
Diversification Opportunities for Royce Opportunity and Hennessy Technology
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Royce and Hennessy is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Royce Opportunity Fund and Hennessy Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Technology and Royce Opportunity 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 Royce Opportunity Fund are associated (or correlated) with Hennessy Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Technology has no effect on the direction of Royce Opportunity i.e., Royce Opportunity and Hennessy Technology go up and down completely randomly.
Pair Corralation between Royce Opportunity and Hennessy Technology
Assuming the 90 days horizon Royce Opportunity Fund is expected to under-perform the Hennessy Technology. In addition to that, Royce Opportunity is 1.29 times more volatile than Hennessy Technology Fund. It trades about -0.07 of its total potential returns per unit of risk. Hennessy Technology Fund is currently generating about 0.03 per unit of volatility. If you would invest 2,359 in Hennessy Technology Fund on September 14, 2024 and sell it today you would earn a total of 20.00 from holding Hennessy Technology Fund or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Royce Opportunity Fund vs. Hennessy Technology Fund
Performance |
| Timeline |
| Royce Opportunity |
| Hennessy Technology |
Royce Opportunity and Hennessy Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Royce Opportunity and Hennessy Technology
The main advantage of trading using opposite Royce Opportunity and Hennessy Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Royce Opportunity position performs unexpectedly, Hennessy Technology 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 Technology will offset losses from the drop in Hennessy Technology's long position.| Royce Opportunity vs. Needham Aggressive Growth | Royce Opportunity vs. Alliancebernstein Global High | Royce Opportunity vs. Us High Relative | Royce Opportunity vs. Ppm High Yield |
| Hennessy Technology vs. Black Oak Emerging | Hennessy Technology vs. Hennessy Large Cap | Hennessy Technology vs. Hennessy Japan Fund | Hennessy Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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