Correlation Between Ultra Short and Hennessy Small
Can any of the company-specific risk be diversified away by investing in both Ultra Short 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 Ultra Short and Hennessy Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Short Fixed Income and Hennessy Small Cap, you can compare the effects of market volatilities on Ultra Short 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 Ultra Short with a short position of Hennessy Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra Short and Hennessy Small.
Diversification Opportunities for Ultra Short and Hennessy Small
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ultra and Hennessy is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Fixed Income 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 Ultra Short 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 Ultra Short Fixed Income 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 Ultra Short i.e., Ultra Short and Hennessy Small go up and down completely randomly.
Pair Corralation between Ultra Short and Hennessy Small
Assuming the 90 days horizon Ultra Short is expected to generate 4.17 times less return on investment than Hennessy Small. But when comparing it to its historical volatility, Ultra Short Fixed Income is 20.59 times less risky than Hennessy Small. It trades about 0.25 of its potential returns per unit of risk. Hennessy Small Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,297 in Hennessy Small Cap on September 12, 2024 and sell it today you would earn a total of 401.00 from holding Hennessy Small Cap or generate 30.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Short Fixed Income vs. Hennessy Small Cap
Performance |
| Timeline |
| Ultra Short Fixed |
| Hennessy Small Cap |
Ultra Short and Hennessy Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra Short and Hennessy Small
The main advantage of trading using opposite Ultra Short and Hennessy Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra Short 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.| Ultra Short vs. Ppm High Yield | Ultra Short vs. Calvert High Yield | Ultra Short vs. Fa 529 Aggressive | Ultra Short vs. Needham Aggressive Growth |
| Hennessy Small vs. Df Dent Small | Hennessy Small vs. Touchstone Small Cap | Hennessy Small vs. Champlain Small | Hennessy Small vs. Old Westbury Small |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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