Correlation Between Hennessy Cornerstone and Hennessy Large

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

Diversification Opportunities for Hennessy Cornerstone and Hennessy Large

0.9

Correlation Coefficient

Hennessy Cornerstone  Hennessy Large

Almost no diversification

The 3 months correlation between Hennessy and Hennessy is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Growth and Hennessy Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Large Cap 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 Hennessy Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Large Cap has no effect on the direction of Hennessy Cornerstone i.e., Hennessy Cornerstone and Hennessy Large go up and down completely randomly.

Pair Corralation between Hennessy Cornerstone and Hennessy Large

Assuming the 90 days horizon Hennessy Cornerstone is expected to generate 2.35 times less return on investment than Hennessy Large. But when comparing it to its historical volatility, Hennessy Nerstone Growth is 1.47 times less risky than Hennessy Large. It trades about 0.1 of its potential returns per unit of risk. Hennessy Large Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,665  in Hennessy Large Cap on August 30, 2024 and sell it today you would earn a total of  547.00  from holding Hennessy Large Cap or generate 20.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Hennessy Nerstone Growth  vs.  Hennessy Large Cap

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.

Hennessy Large Cap

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Hennessy Cornerstone and Hennessy Large

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

The idea behind Hennessy Nerstone Growth and Hennessy Large Cap 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.