Correlation Between Hennessy Technology and Voya Index

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

Diversification Opportunities for Hennessy Technology and Voya Index

0.89

Correlation Coefficient

Hennessy Technology  Voya Index

Very poor diversification

The 3 months correlation between Hennessy and Voya is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Voya Index Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Index Plus 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 Voya Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Index Plus has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Voya Index go up and down completely randomly.

Pair Corralation between Hennessy Technology and Voya Index

Assuming the 90 days horizon Hennessy Technology is expected to generate 1.18 times less return on investment than Voya Index. In addition to that, Hennessy Technology is 1.08 times more volatile than Voya Index Plus. It trades about 0.09 of its total potential returns per unit of risk. Voya Index Plus is currently generating about 0.11 per unit of volatility. If you would invest  2,226  in Voya Index Plus on September 14, 2024 and sell it today you would earn a total of  192.00  from holding Voya Index Plus or generate 8.63% return on investment over 90 days.

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

Hennessy Technology Fund  vs.  Voya Index Plus

Hennessy Technology

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Technology Fund are ranked lower than 6 (%) 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.

Voya Index Plus

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Hennessy Technology and Voya Index

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

The idea behind Hennessy Technology Fund and Voya Index Plus 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.