Correlation Between Hennessy Capital and Compass Digital

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

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

Diversification Opportunities for Hennessy Capital and Compass Digital

-0.21

Correlation Coefficient

Hennessy Capital  Compass Digital

Very good diversification

The 3 months correlation between Hennessy and Compass is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Capital Investment and Compass Digital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compass Digital Acqu and Hennessy Capital 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 Hennessy Capital Investment are associated (or correlated) with Compass Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compass Digital Acqu has no effect on the direction of Hennessy Capital i.e., Hennessy Capital and Compass Digital go up and down completely randomly.

Pair Corralation between Hennessy Capital and Compass Digital

Assuming the 90 days horizon Hennessy Capital is expected to generate 1.59 times less return on investment than Compass Digital. In addition to that, Hennessy Capital is 2.16 times more volatile than Compass Digital Acquisition. It trades about 0.01 of its total potential returns per unit of risk. Compass Digital Acquisition is currently generating about 0.03 per unit of volatility. If you would invest  1,077  in Compass Digital Acquisition on September 5, 2024 and sell it today you would earn a total of  9.00  from holding Compass Digital Acquisition or generate 0.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.32%
Values	Daily Returns

Hennessy Capital Investment  vs.  Compass Digital Acquisition

Hennessy Capital Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Capital Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Hennessy Capital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Compass Digital Acqu

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Compass Digital Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Compass Digital is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hennessy Capital and Compass Digital

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

The idea behind Hennessy Capital Investment and Compass Digital Acquisition 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.