Correlation Between GSR II and Hennessy Capital

Can any of the company-specific risk be diversified away by investing in both GSR II and Hennessy Capital 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 GSR II and Hennessy Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GSR II Meteora and Hennessy Capital Investment, you can compare the effects of market volatilities on GSR II and Hennessy Capital 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 GSR II with a short position of Hennessy Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of GSR II and Hennessy Capital.

Diversification Opportunities for GSR II and Hennessy Capital

0.23

Correlation Coefficient

GSR II  Hennessy Capital

Modest diversification

The 3 months correlation between GSR and Hennessy is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding GSR II Meteora and Hennessy Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Capital Inv and GSR II 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 GSR II Meteora are associated (or correlated) with Hennessy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Capital Inv has no effect on the direction of GSR II i.e., GSR II and Hennessy Capital go up and down completely randomly.

Pair Corralation between GSR II and Hennessy Capital

If you would invest  6.00  in Hennessy Capital Investment on September 16, 2024 and sell it today you would earn a total of  5.00  from holding Hennessy Capital Investment or generate 83.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	3.03%
Values	Daily Returns

GSR II Meteora  vs.  Hennessy Capital Investment

GSR II Meteora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GSR II Meteora has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, GSR II is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hennessy Capital Inv

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Capital Investment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal forward indicators, Hennessy Capital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GSR II and Hennessy Capital

The main advantage of trading using opposite GSR II and Hennessy Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GSR II position performs unexpectedly, Hennessy Capital 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 Capital will offset losses from the drop in Hennessy Capital's long position.

The idea behind GSR II Meteora and Hennessy Capital Investment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.