Correlation Between Alphabet and Hennessy Focus

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

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

Diversification Opportunities for Alphabet and Hennessy Focus

-0.29

Correlation Coefficient

Alphabet  Hennessy Focus

Very good diversification

The 3 months correlation between Alphabet and Hennessy is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Hennessy Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Focus and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Hennessy Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Focus has no effect on the direction of Alphabet i.e., Alphabet and Hennessy Focus go up and down completely randomly.

Pair Corralation between Alphabet and Hennessy Focus

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 0.83 times more return on investment than Hennessy Focus. However, Alphabet Inc Class C is 1.21 times less risky than Hennessy Focus. It trades about 0.2 of its potential returns per unit of risk. Hennessy Focus Fund is currently generating about -0.1 per unit of risk. If you would invest  15,819  in Alphabet Inc Class C on September 13, 2024 and sell it today you would earn a total of  3,544  from holding Alphabet Inc Class C or generate 22.4% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Hennessy Focus Fund

Alphabet Class C

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Hennessy Focus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Focus Fund 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 January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Alphabet and Hennessy Focus

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

The idea behind Alphabet Inc Class C and Hennessy Focus 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.