Correlation Between Hennessy Cornerstone and Touchstone Sands

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

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

Diversification Opportunities for Hennessy Cornerstone and Touchstone Sands

0.91

Correlation Coefficient

Hennessy Cornerstone  Touchstone Sands

Almost no diversification

The 3 months correlation between Hennessy and Touchstone is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Growth and Touchstone Sands Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Sands Capital and Hennessy Cornerstone 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 Nerstone Growth are associated (or correlated) with Touchstone Sands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Sands Capital has no effect on the direction of Hennessy Cornerstone i.e., Hennessy Cornerstone and Touchstone Sands go up and down completely randomly.

Pair Corralation between Hennessy Cornerstone and Touchstone Sands

Assuming the 90 days horizon Hennessy Cornerstone is expected to generate 1.66 times less return on investment than Touchstone Sands. In addition to that, Hennessy Cornerstone is 1.03 times more volatile than Touchstone Sands Capital. It trades about 0.1 of its total potential returns per unit of risk. Touchstone Sands Capital is currently generating about 0.18 per unit of volatility. If you would invest  1,610  in Touchstone Sands Capital on August 30, 2024 and sell it today you would earn a total of  225.00  from holding Touchstone Sands Capital or generate 13.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Hennessy Nerstone Growth  vs.  Touchstone Sands Capital

Hennessy Nerstone Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Nerstone Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hennessy Cornerstone may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Touchstone Sands Capital

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Touchstone Sands Capital are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Touchstone Sands showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hennessy Cornerstone and Touchstone Sands

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

The idea behind Hennessy Nerstone Growth and Touchstone Sands Capital 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.