Correlation Between Hennessy Capital and GSR II

Can any of the company-specific risk be diversified away by investing in both Hennessy Capital and GSR II 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 GSR II 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 GSR II Meteora, you can compare the effects of market volatilities on Hennessy Capital and GSR II 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 GSR II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Capital and GSR II.

Diversification Opportunities for Hennessy Capital and GSR II

0.23

Correlation Coefficient

Hennessy Capital  GSR II

Modest diversification

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

Pair Corralation between Hennessy Capital and GSR II

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

Hennessy Capital Investment  vs.  GSR II Meteora

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.

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.

Pair Trading with Hennessy Capital and GSR II

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

The idea behind Hennessy Capital Investment and GSR II Meteora 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.