Correlation Between Alphabet and Hennessy Japan

Can any of the company-specific risk be diversified away by investing in both Alphabet and Hennessy Japan 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 Japan 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 Japan Fund, you can compare the effects of market volatilities on Alphabet and Hennessy Japan 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 Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Hennessy Japan.

Diversification Opportunities for Alphabet and Hennessy Japan

-0.1

Correlation Coefficient

Alphabet  Hennessy Japan

Good diversification

The 3 months correlation between Alphabet and Hennessy is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Hennessy Japan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Japan 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 Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Japan has no effect on the direction of Alphabet i.e., Alphabet and Hennessy Japan go up and down completely randomly.

Pair Corralation between Alphabet and Hennessy Japan

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Hennessy Japan. In addition to that, Alphabet is 2.02 times more volatile than Hennessy Japan Fund. It trades about -0.16 of its total potential returns per unit of risk. Hennessy Japan Fund is currently generating about 0.0 per unit of volatility. If you would invest  4,138  in Hennessy Japan Fund on December 30, 2024 and sell it today you would lose (7.00) from holding Hennessy Japan Fund or give up 0.17% of portfolio value 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 Japan Fund

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hennessy Japan

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Alphabet and Hennessy Japan

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

The idea behind Alphabet Inc Class C and Hennessy Japan 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.