Correlation Between Hennessy Technology and Focused International

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

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

Diversification Opportunities for Hennessy Technology and Focused International

-0.4

Correlation Coefficient

Hennessy Technology  Focused International

Very good diversification

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

Pair Corralation between Hennessy Technology and Focused International

Assuming the 90 days horizon Hennessy Technology Fund is expected to under-perform the Focused International. In addition to that, Hennessy Technology is 1.97 times more volatile than Focused International Growth. It trades about -0.02 of its total potential returns per unit of risk. Focused International Growth is currently generating about -0.03 per unit of volatility. If you would invest  1,729  in Focused International Growth on September 12, 2024 and sell it today you would lose (10.00) from holding Focused International Growth or give up 0.58% of portfolio value over 90 days.

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

Hennessy Technology Fund  vs.  Focused International Growth

Hennessy Technology

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Technology Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Hennessy Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Focused International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focused International Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Focused International 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 Technology and Focused International

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

The idea behind Hennessy Technology Fund and Focused International 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.