Correlation Between VHAI and Hennessy Technology

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

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

Diversification Opportunities for VHAI and Hennessy Technology

-0.57

Correlation Coefficient

VHAI  Hennessy Technology

Excellent diversification

The 3 months correlation between VHAI and Hennessy is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding VHAI and Hennessy Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Technology and VHAI 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 VHAI are associated (or correlated) with Hennessy Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Technology has no effect on the direction of VHAI i.e., VHAI and Hennessy Technology go up and down completely randomly.

Pair Corralation between VHAI and Hennessy Technology

Given the investment horizon of 90 days VHAI is expected to under-perform the Hennessy Technology. In addition to that, VHAI is 7.53 times more volatile than Hennessy Technology Fund. It trades about -0.01 of its total potential returns per unit of risk. Hennessy Technology Fund is currently generating about 0.28 per unit of volatility. If you would invest  2,248  in Hennessy Technology Fund on September 5, 2024 and sell it today you would earn a total of  181.00  from holding Hennessy Technology Fund or generate 8.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.36%
Values	Daily Returns

VHAI  vs.  Hennessy Technology Fund

VHAI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VHAI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Hennessy Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Technology Fund are ranked lower than 12 (%) 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.

Pair Trading with VHAI and Hennessy Technology

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

The idea behind VHAI and Hennessy Technology Fund 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.