Correlation Between Hennessy and Vanguard Ultra

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

By analyzing existing cross correlation between Hennessy Bp Energy and Vanguard Ultra Short Term Bond, you can compare the effects of market volatilities on Hennessy and Vanguard Ultra 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 Vanguard Ultra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Vanguard Ultra.

Diversification Opportunities for Hennessy and Vanguard Ultra

0.77

Correlation Coefficient

Hennessy  Vanguard Ultra

Poor diversification

The 3 months correlation between Hennessy and Vanguard is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Vanguard Ultra Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Ultra Short 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 Energy are associated (or correlated) with Vanguard Ultra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Ultra Short has no effect on the direction of Hennessy i.e., Hennessy and Vanguard Ultra go up and down completely randomly.

Pair Corralation between Hennessy and Vanguard Ultra

Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 22.75 times more return on investment than Vanguard Ultra. However, Hennessy is 22.75 times more volatile than Vanguard Ultra Short Term Bond. It trades about 0.06 of its potential returns per unit of risk. Vanguard Ultra Short Term Bond is currently generating about 0.42 per unit of risk. If you would invest  2,373  in Hennessy Bp Energy on September 13, 2024 and sell it today you would earn a total of  376.00  from holding Hennessy Bp Energy or generate 15.84% return on investment over 90 days.

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

Hennessy Bp Energy  vs.  Vanguard Ultra Short Term Bond

Hennessy Bp Energy

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Bp Energy are ranked lower than 10 (%) 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.

Vanguard Ultra Short

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Ultra Short Term Bond are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Vanguard Ultra 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 and Vanguard Ultra

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

The idea behind Hennessy Bp Energy and Vanguard Ultra Short Term Bond 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.