Correlation Between Biotechnology Ultrasector and Hennessy

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

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

Diversification Opportunities for Biotechnology Ultrasector and Hennessy

-0.19

Correlation Coefficient

Biotechnology Ultrasector  Hennessy

Good diversification

The 3 months correlation between Biotechnology and Hennessy is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Biotechnology Ultrasector Prof and Hennessy Bp Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Bp Midstream and Biotechnology Ultrasector 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 Biotechnology Ultrasector Profund are associated (or correlated) with Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Bp Midstream has no effect on the direction of Biotechnology Ultrasector i.e., Biotechnology Ultrasector and Hennessy go up and down completely randomly.

Pair Corralation between Biotechnology Ultrasector and Hennessy

Assuming the 90 days horizon Biotechnology Ultrasector Profund is expected to under-perform the Hennessy. In addition to that, Biotechnology Ultrasector is 3.2 times more volatile than Hennessy Bp Midstream. It trades about -0.12 of its total potential returns per unit of risk. Hennessy Bp Midstream is currently generating about 0.12 per unit of volatility. If you would invest  1,244  in Hennessy Bp Midstream on October 7, 2024 and sell it today you would earn a total of  113.00  from holding Hennessy Bp Midstream or generate 9.08% return on investment over 90 days.

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

Biotechnology Ultrasector Prof  vs.  Hennessy Bp Midstream

Biotechnology Ultrasector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biotechnology Ultrasector Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Hennessy Bp Midstream

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Bp Midstream are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Hennessy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Biotechnology Ultrasector and Hennessy

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

The idea behind Biotechnology Ultrasector Profund and Hennessy Bp Midstream 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.