Correlation Between Hennessy and Hennessy Nerstone

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

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

Diversification Opportunities for Hennessy and Hennessy Nerstone

0.4

Correlation Coefficient

Hennessy  Hennessy Nerstone

Very weak diversification

The 3 months correlation between Hennessy and Hennessy is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Midstream and Hennessy Nerstone Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Growth and Hennessy 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 Bp Midstream are associated (or correlated) with Hennessy Nerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Growth has no effect on the direction of Hennessy i.e., Hennessy and Hennessy Nerstone go up and down completely randomly.

Pair Corralation between Hennessy and Hennessy Nerstone

Assuming the 90 days horizon Hennessy Bp Midstream is expected to generate 0.61 times more return on investment than Hennessy Nerstone. However, Hennessy Bp Midstream is 1.65 times less risky than Hennessy Nerstone. It trades about 0.12 of its potential returns per unit of risk. Hennessy Nerstone Growth is currently generating about -0.08 per unit of risk. If you would invest  1,155  in Hennessy Bp Midstream on September 28, 2024 and sell it today you would earn a total of  105.00  from holding Hennessy Bp Midstream or generate 9.09% return on investment over 90 days.

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

Hennessy Bp Midstream  vs.  Hennessy Nerstone Growth

Hennessy Bp Midstream

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Bp Midstream are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hennessy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hennessy Nerstone Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Nerstone Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Hennessy and Hennessy Nerstone

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

The idea behind Hennessy Bp Midstream and Hennessy Nerstone Growth 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.