Correlation Between Hennessy Balanced and Hennessy Nerstone

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

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

Diversification Opportunities for Hennessy Balanced and Hennessy Nerstone

0.15

Correlation Coefficient

Hennessy Balanced  Hennessy Nerstone

Average diversification

The 3 months correlation between Hennessy and Hennessy is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Balanced Fund and Hennessy Nerstone Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Growth and Hennessy Balanced 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 Hennessy Balanced Fund are associated (or correlated) with Hennessy Nerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Growth has no effect on the direction of Hennessy Balanced i.e., Hennessy Balanced and Hennessy Nerstone go up and down completely randomly.

Pair Corralation between Hennessy Balanced and Hennessy Nerstone

Assuming the 90 days horizon Hennessy Balanced Fund is expected to under-perform the Hennessy Nerstone. But the mutual fund apears to be less risky and, when comparing its historical volatility, Hennessy Balanced Fund is 5.46 times less risky than Hennessy Nerstone. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Hennessy Nerstone Growth is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  3,515  in Hennessy Nerstone Growth on September 14, 2024 and sell it today you would lose (108.00) from holding Hennessy Nerstone Growth or give up 3.07% of portfolio value over 90 days.

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

Hennessy Balanced Fund  vs.  Hennessy Nerstone Growth

Hennessy Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hennessy Nerstone Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hennessy Balanced and Hennessy Nerstone

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

The idea behind Hennessy Balanced Fund and Hennessy Nerstone Growth 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.