Correlation Between Hennessy Technology and Parnassus Funds

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

Diversification Opportunities for Hennessy Technology and Parnassus Funds

0.95

Correlation Coefficient

Hennessy Technology  Parnassus Funds

Almost no diversification

The 3 months correlation between Hennessy and Parnassus is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Parnassus Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parnassus Funds 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 Parnassus Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parnassus Funds has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Parnassus Funds go up and down completely randomly.

Pair Corralation between Hennessy Technology and Parnassus Funds

Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 1.23 times more return on investment than Parnassus Funds. However, Hennessy Technology is 1.23 times more volatile than Parnassus Funds . It trades about 0.15 of its potential returns per unit of risk. Parnassus Funds is currently generating about 0.18 per unit of risk. If you would invest  2,190  in Hennessy Technology Fund on September 4, 2024 and sell it today you would earn a total of  239.00  from holding Hennessy Technology Fund or generate 10.91% return on investment over 90 days.

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

Hennessy Technology Fund  vs.  Parnassus Funds

Hennessy Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Technology Fund are ranked lower than 11 (%) 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.

Parnassus Funds

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Parnassus Funds are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Parnassus Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hennessy Technology and Parnassus Funds

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

The idea behind Hennessy Technology Fund and Parnassus Funds 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.