Correlation Between Hennessy Focus and Blackrock Science

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

By analyzing existing cross correlation between Hennessy Focus Fund and Blackrock Science Technology, you can compare the effects of market volatilities on Hennessy Focus and Blackrock Science 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 Focus with a short position of Blackrock Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Focus and Blackrock Science.

Diversification Opportunities for Hennessy Focus and Blackrock Science

0.63

Correlation Coefficient

Hennessy Focus  Blackrock Science

Poor diversification

The 3 months correlation between Hennessy and Blackrock is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Focus Fund and Blackrock Science Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Science and Hennessy Focus 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 Focus Fund are associated (or correlated) with Blackrock Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Science has no effect on the direction of Hennessy Focus i.e., Hennessy Focus and Blackrock Science go up and down completely randomly.

Pair Corralation between Hennessy Focus and Blackrock Science

Assuming the 90 days horizon Hennessy Focus is expected to generate 2.92 times less return on investment than Blackrock Science. But when comparing it to its historical volatility, Hennessy Focus Fund is 1.18 times less risky than Blackrock Science. It trades about 0.07 of its potential returns per unit of risk. Blackrock Science Technology is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  6,175  in Blackrock Science Technology on September 5, 2024 and sell it today you would earn a total of  926.00  from holding Blackrock Science Technology or generate 15.0% return on investment over 90 days.

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

Hennessy Focus Fund  vs.  Blackrock Science Technology

Hennessy Focus

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Focus Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Hennessy Focus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Science

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Science Technology are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Blackrock Science showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hennessy Focus and Blackrock Science

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

The idea behind Hennessy Focus Fund and Blackrock Science Technology 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.