Correlation Between Utilities Fund and Hennessy Gas
Can any of the company-specific risk be diversified away by investing in both Utilities Fund and Hennessy Gas 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 Utilities Fund and Hennessy Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Utilities Fund Investor and Hennessy Gas Utility, you can compare the effects of market volatilities on Utilities Fund and Hennessy Gas 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 Utilities Fund with a short position of Hennessy Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Fund and Hennessy Gas.
Diversification Opportunities for Utilities Fund and Hennessy Gas
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Utilities and Hennessy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Fund Investor and Hennessy Gas Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Gas Utility and Utilities Fund 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 Utilities Fund Investor are associated (or correlated) with Hennessy Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Gas Utility has no effect on the direction of Utilities Fund i.e., Utilities Fund and Hennessy Gas go up and down completely randomly.
Pair Corralation between Utilities Fund and Hennessy Gas
Assuming the 90 days horizon Utilities Fund is expected to generate 1.45 times less return on investment than Hennessy Gas. In addition to that, Utilities Fund is 1.47 times more volatile than Hennessy Gas Utility. It trades about 0.11 of its total potential returns per unit of risk. Hennessy Gas Utility is currently generating about 0.24 per unit of volatility. If you would invest 2,629 in Hennessy Gas Utility on September 6, 2024 and sell it today you would earn a total of 305.00 from holding Hennessy Gas Utility or generate 11.6% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.44% |
Values | Daily Returns |
Utilities Fund Investor vs. Hennessy Gas Utility
Performance |
Timeline |
Utilities Fund Investor |
Hennessy Gas Utility |
Utilities Fund and Hennessy Gas Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Utilities Fund and Hennessy Gas
The main advantage of trading using opposite Utilities Fund and Hennessy Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utilities Fund position performs unexpectedly, Hennessy Gas 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 Gas will offset losses from the drop in Hennessy Gas' long position.Utilities Fund vs. Real Estate Fund | Utilities Fund vs. Emerging Markets Fund | Utilities Fund vs. Heritage Fund Investor | Utilities Fund vs. Income Growth Fund |
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Check out your portfolio center.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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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