Correlation Between Vanguard 500 and Hennessy Cornerstone
Can any of the company-specific risk be diversified away by investing in both Vanguard 500 and Hennessy Cornerstone 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 Vanguard 500 and Hennessy Cornerstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard 500 Index and Hennessy Nerstone Value, you can compare the effects of market volatilities on Vanguard 500 and Hennessy Cornerstone 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 Vanguard 500 with a short position of Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard 500 and Hennessy Cornerstone.
Diversification Opportunities for Vanguard 500 and Hennessy Cornerstone
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Hennessy is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard 500 Index and Hennessy Nerstone Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Value and Vanguard 500 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 Vanguard 500 Index are associated (or correlated) with Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Value has no effect on the direction of Vanguard 500 i.e., Vanguard 500 and Hennessy Cornerstone go up and down completely randomly.
Pair Corralation between Vanguard 500 and Hennessy Cornerstone
Assuming the 90 days horizon Vanguard 500 Index is expected to generate 1.42 times more return on investment than Hennessy Cornerstone. However, Vanguard 500 is 1.42 times more volatile than Hennessy Nerstone Value. It trades about 0.12 of its potential returns per unit of risk. Hennessy Nerstone Value is currently generating about 0.09 per unit of risk. If you would invest 53,537 in Vanguard 500 Index on August 24, 2024 and sell it today you would earn a total of 1,155 from holding Vanguard 500 Index or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Vanguard 500 Index vs. Hennessy Nerstone Value
Performance |
| Timeline |
| Vanguard 500 Index |
| Hennessy Nerstone Value |
Vanguard 500 and Hennessy Cornerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard 500 and Hennessy Cornerstone
The main advantage of trading using opposite Vanguard 500 and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard 500 position performs unexpectedly, Hennessy Cornerstone 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 Cornerstone will offset losses from the drop in Hennessy Cornerstone's long position.| Vanguard 500 vs. Vanguard Total Stock | Vanguard 500 vs. Vanguard Total Bond | Vanguard 500 vs. Vanguard Windsor Ii | Vanguard 500 vs. Vanguard Small Cap Index |
| Hennessy Cornerstone vs. Alpsalerian Energy Infrastructure | Hennessy Cornerstone vs. Gmo Resources | Hennessy Cornerstone vs. Energy Basic Materials | Hennessy Cornerstone vs. Hennessy Bp Energy |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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