Correlation Between Vanguard Mid and Hennessy Focus
Can any of the company-specific risk be diversified away by investing in both Vanguard Mid and Hennessy Focus 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 Mid and Hennessy Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard Mid Cap Index and Hennessy Focus Fund, you can compare the effects of market volatilities on Vanguard Mid and Hennessy Focus 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 Mid with a short position of Hennessy Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Mid and Hennessy Focus.
Diversification Opportunities for Vanguard Mid and Hennessy Focus
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vanguard and Hennessy is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mid Cap Index and Hennessy Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Focus and Vanguard Mid 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 Mid Cap Index are associated (or correlated) with Hennessy Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Focus has no effect on the direction of Vanguard Mid i.e., Vanguard Mid and Hennessy Focus go up and down completely randomly.
Pair Corralation between Vanguard Mid and Hennessy Focus
Assuming the 90 days horizon Vanguard Mid Cap Index is expected to generate 0.46 times more return on investment than Hennessy Focus. However, Vanguard Mid Cap Index is 2.19 times less risky than Hennessy Focus. It trades about 0.16 of its potential returns per unit of risk. Hennessy Focus Fund is currently generating about 0.03 per unit of risk. If you would invest 5,550 in Vanguard Mid Cap Index on September 1, 2024 and sell it today you would earn a total of 2,232 from holding Vanguard Mid Cap Index or generate 40.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard Mid Cap Index vs. Hennessy Focus Fund
Performance |
| Timeline |
| Vanguard Mid Cap |
| Hennessy Focus |
Vanguard Mid and Hennessy Focus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard Mid and Hennessy Focus
The main advantage of trading using opposite Vanguard Mid and Hennessy Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mid position performs unexpectedly, Hennessy Focus 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 Focus will offset losses from the drop in Hennessy Focus' long position.| Vanguard Mid vs. Vanguard Small Cap Index | Vanguard Mid vs. Vanguard Institutional Index | Vanguard Mid vs. Vanguard Total Bond | Vanguard Mid vs. Vanguard Total International |
| Hennessy Focus vs. Hennessy Nerstone Mid | Hennessy Focus vs. Amg Yacktman Focused | Hennessy Focus vs. Parnassus Endeavor Fund | Hennessy Focus 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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