Correlation Between Microsoft and Hennessy Nerstone

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

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

Diversification Opportunities for Microsoft and Hennessy Nerstone

-0.49

Correlation Coefficient

Microsoft  Hennessy Nerstone

Very good diversification

The 3 months correlation between Microsoft and Hennessy is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Hennessy Nerstone Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Value and Microsoft 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 Microsoft are associated (or correlated) with Hennessy Nerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Value has no effect on the direction of Microsoft i.e., Microsoft and Hennessy Nerstone go up and down completely randomly.

Pair Corralation between Microsoft and Hennessy Nerstone

Given the investment horizon of 90 days Microsoft is expected to generate 1.79 times more return on investment than Hennessy Nerstone. However, Microsoft is 1.79 times more volatile than Hennessy Nerstone Value. It trades about 0.01 of its potential returns per unit of risk. Hennessy Nerstone Value is currently generating about -0.15 per unit of risk. If you would invest  42,944  in Microsoft on September 29, 2024 and sell it today you would earn a total of  109.00  from holding Microsoft or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Microsoft  vs.  Hennessy Nerstone Value

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Hennessy Nerstone Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Nerstone Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Microsoft and Hennessy Nerstone

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

The idea behind Microsoft and Hennessy Nerstone Value 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.