Correlation Between Biotechnology Fund and Hennessy Technology
Can any of the company-specific risk be diversified away by investing in both Biotechnology Fund 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 Biotechnology Fund and Hennessy Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biotechnology Fund Class and Hennessy Technology Fund, you can compare the effects of market volatilities on Biotechnology Fund 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 Biotechnology Fund with a short position of Hennessy Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotechnology Fund and Hennessy Technology.
Diversification Opportunities for Biotechnology Fund and Hennessy Technology
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Biotechnology and Hennessy is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Fund Class and Hennessy Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Technology and Biotechnology Fund 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 Biotechnology Fund Class 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 Biotechnology Fund i.e., Biotechnology Fund and Hennessy Technology go up and down completely randomly.
Pair Corralation between Biotechnology Fund and Hennessy Technology
Assuming the 90 days horizon Biotechnology Fund Class is expected to generate 0.87 times more return on investment than Hennessy Technology. However, Biotechnology Fund Class is 1.15 times less risky than Hennessy Technology. It trades about 0.0 of its potential returns per unit of risk. Hennessy Technology Fund is currently generating about -0.08 per unit of risk. If you would invest 4,257 in Biotechnology Fund Class on November 29, 2024 and sell it today you would lose (8.00) from holding Biotechnology Fund Class or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Biotechnology Fund Class vs. Hennessy Technology Fund
Performance |
| Timeline |
| Biotechnology Fund Class |
| Hennessy Technology |
Biotechnology Fund and Hennessy Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biotechnology Fund and Hennessy Technology
The main advantage of trading using opposite Biotechnology Fund and Hennessy Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotechnology Fund 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.| Biotechnology Fund vs. Manning Napier Diversified | Biotechnology Fund vs. Aqr Diversified Arbitrage | Biotechnology Fund vs. Jhancock Diversified Macro | Biotechnology Fund vs. Guidepath Conservative Income |
| 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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