Correlation Between Rmb Mendon and Hennessy Small

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

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

Diversification Opportunities for Rmb Mendon and Hennessy Small

0.98

Correlation Coefficient

Rmb Mendon  Hennessy Small

Almost no diversification

The 3 months correlation between Rmb and Hennessy is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Rmb Mendon Financial and Hennessy Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Small Cap and Rmb Mendon 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 Rmb Mendon Financial are associated (or correlated) with Hennessy Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Small Cap has no effect on the direction of Rmb Mendon i.e., Rmb Mendon and Hennessy Small go up and down completely randomly.

Pair Corralation between Rmb Mendon and Hennessy Small

Assuming the 90 days horizon Rmb Mendon Financial is expected to generate 0.81 times more return on investment than Hennessy Small. However, Rmb Mendon Financial is 1.24 times less risky than Hennessy Small. It trades about 0.13 of its potential returns per unit of risk. Hennessy Small Cap is currently generating about 0.08 per unit of risk. If you would invest  4,095  in Rmb Mendon Financial on September 14, 2024 and sell it today you would earn a total of  607.00  from holding Rmb Mendon Financial or generate 14.82% return on investment over 90 days.

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

Rmb Mendon Financial  vs.  Hennessy Small Cap

Rmb Mendon Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rmb Mendon Financial are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rmb Mendon showed solid returns over the last few months and may actually be approaching a breakup point.

Hennessy Small Cap

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Small Cap are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hennessy Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rmb Mendon and Hennessy Small

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

The idea behind Rmb Mendon Financial and Hennessy Small Cap 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.