Correlation Between Hennessy Nerstone and Us Government

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

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

Diversification Opportunities for Hennessy Nerstone and Us Government

-0.67

Correlation Coefficient

Hennessy Nerstone  Us Government

Excellent diversification

The 3 months correlation between Hennessy and RGVJX is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Mid and Us Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Securities and Hennessy Nerstone 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 Mid are associated (or correlated) with Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Securities has no effect on the direction of Hennessy Nerstone i.e., Hennessy Nerstone and Us Government go up and down completely randomly.

Pair Corralation between Hennessy Nerstone and Us Government

Assuming the 90 days horizon Hennessy Nerstone Mid is expected to generate 7.59 times more return on investment than Us Government. However, Hennessy Nerstone is 7.59 times more volatile than Us Government Securities. It trades about 0.01 of its potential returns per unit of risk. Us Government Securities is currently generating about -0.13 per unit of risk. If you would invest  2,436  in Hennessy Nerstone Mid on September 12, 2024 and sell it today you would earn a total of  4.00  from holding Hennessy Nerstone Mid or generate 0.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hennessy Nerstone Mid  vs.  Us Government Securities

Hennessy Nerstone Mid

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Nerstone Mid are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Hennessy Nerstone is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Us Government Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Us Government Securities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking indicators, Us Government is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hennessy Nerstone and Us Government

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

The idea behind Hennessy Nerstone Mid and Us Government Securities 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.