Correlation Between Hennessy Technology and Technology Munications

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

Diversification Opportunities for Hennessy Technology and Technology Munications

0.85

Correlation Coefficient

Hennessy Technology  Technology Munications

Very poor diversification

The 3 months correlation between Hennessy and Technology is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Technology Munications Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Munications 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 Technology Munications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Munications has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Technology Munications go up and down completely randomly.

Pair Corralation between Hennessy Technology and Technology Munications

Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 0.82 times more return on investment than Technology Munications. However, Hennessy Technology Fund is 1.22 times less risky than Technology Munications. It trades about 0.11 of its potential returns per unit of risk. Technology Munications Portfolio is currently generating about 0.0 per unit of risk. If you would invest  2,194  in Hennessy Technology Fund on September 12, 2024 and sell it today you would earn a total of  188.00  from holding Hennessy Technology Fund or generate 8.57% 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.  Technology Munications Portfol

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.

Technology Munications

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Technology Munications Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Technology Munications 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 Technology Munications

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

The idea behind Hennessy Technology Fund and Technology Munications Portfolio 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.