Correlation Between Thrivent Large and Hennessy Japan

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

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

Diversification Opportunities for Thrivent Large and Hennessy Japan

-0.33

Correlation Coefficient

Thrivent Large  Hennessy Japan

Very good diversification

The 3 months correlation between Thrivent and Hennessy is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Thrivent Large Cap and Hennessy Japan Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Japan Small and Thrivent Large 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 Thrivent Large Cap are associated (or correlated) with Hennessy Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Japan Small has no effect on the direction of Thrivent Large i.e., Thrivent Large and Hennessy Japan go up and down completely randomly.

Pair Corralation between Thrivent Large and Hennessy Japan

Assuming the 90 days horizon Thrivent Large Cap is expected to generate 0.87 times more return on investment than Hennessy Japan. However, Thrivent Large Cap is 1.14 times less risky than Hennessy Japan. It trades about 0.17 of its potential returns per unit of risk. Hennessy Japan Small is currently generating about 0.01 per unit of risk. If you would invest  2,088  in Thrivent Large Cap on August 31, 2024 and sell it today you would earn a total of  208.00  from holding Thrivent Large Cap or generate 9.96% return on investment over 90 days.

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

Thrivent Large Cap  vs.  Hennessy Japan Small

Thrivent Large Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Thrivent Large Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Thrivent Large may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Hennessy Japan Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Japan Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Hennessy Japan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Thrivent Large and Hennessy Japan

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

The idea behind Thrivent Large Cap and Hennessy Japan Small 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.