Correlation Between Technology Portfolio and Hennessy Technology

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

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

Diversification Opportunities for Technology Portfolio and Hennessy Technology

0.31

Correlation Coefficient

Technology Portfolio  Hennessy Technology

Weak diversification

The 3 months correlation between Technology and Hennessy is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Technology Portfolio Technolog and Hennessy Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Technology and Technology Portfolio 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 Technology Portfolio Technology 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 Technology Portfolio i.e., Technology Portfolio and Hennessy Technology go up and down completely randomly.

Pair Corralation between Technology Portfolio and Hennessy Technology

Assuming the 90 days horizon Technology Portfolio Technology is expected to generate 1.19 times more return on investment than Hennessy Technology. However, Technology Portfolio is 1.19 times more volatile than Hennessy Technology Fund. It trades about -0.05 of its potential returns per unit of risk. Hennessy Technology Fund is currently generating about -0.08 per unit of risk. If you would invest  3,740  in Technology Portfolio Technology on December 2, 2024 and sell it today you would lose (223.00) from holding Technology Portfolio Technology or give up 5.96% of portfolio value over 90 days.

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

Technology Portfolio Technolog  vs.  Hennessy Technology Fund

Technology Portfolio

Risk-Adjusted Performance

Very Weak

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

Hennessy Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hennessy Technology Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Technology Portfolio and Hennessy Technology

The main advantage of trading using opposite Technology Portfolio and Hennessy Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Portfolio 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 Technology Portfolio Technology 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.