Correlation Between Vanguard Energy and Hennessy
Can any of the company-specific risk be diversified away by investing in both Vanguard Energy and Hennessy 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 Energy and Hennessy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Energy Fund and Hennessy Bp Energy, you can compare the effects of market volatilities on Vanguard Energy and Hennessy 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 Energy with a short position of Hennessy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Energy and Hennessy.
Diversification Opportunities for Vanguard Energy and Hennessy
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 Energy Fund and Hennessy Bp Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Bp Energy and Vanguard Energy 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 Energy Fund are associated (or correlated) with Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Bp Energy has no effect on the direction of Vanguard Energy i.e., Vanguard Energy and Hennessy go up and down completely randomly.
Pair Corralation between Vanguard Energy and Hennessy
Assuming the 90 days horizon Vanguard Energy is expected to generate 1.64 times less return on investment than Hennessy. But when comparing it to its historical volatility, Vanguard Energy Fund is 1.54 times less risky than Hennessy. It trades about 0.06 of its potential returns per unit of risk. Hennessy Bp Energy is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,377 in Hennessy Bp Energy on August 24, 2024 and sell it today you would earn a total of 477.00 from holding Hennessy Bp Energy or generate 20.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Vanguard Energy Fund vs. Hennessy Bp Energy
Performance |
| Timeline |
| Vanguard Energy |
| Hennessy Bp Energy |
Vanguard Energy and Hennessy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Energy and Hennessy
The main advantage of trading using opposite Vanguard Energy and Hennessy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Energy position performs unexpectedly, Hennessy 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 will offset losses from the drop in Hennessy's long position.| Vanguard Energy vs. Vanguard Global Capital | Vanguard Energy vs. Vanguard Health Care | Vanguard Energy vs. Vanguard Reit Index | Vanguard Energy vs. Vanguard Emerging Markets |
| Hennessy vs. Vanguard Energy Index | Hennessy vs. Fidelity Select Portfolios | Hennessy vs. Fidelity Advisor Energy | Hennessy vs. Fidelity Advisor 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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