Correlation Between Hennessy Balanced and Harbor Large

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

Diversification Opportunities for Hennessy Balanced and Harbor Large

0.82

Correlation Coefficient

Hennessy Balanced  Harbor Large

Very poor diversification

The 3 months correlation between Hennessy and Harbor is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Balanced Fund and Harbor Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Large Cap 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 Harbor Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Large Cap has no effect on the direction of Hennessy Balanced i.e., Hennessy Balanced and Harbor Large go up and down completely randomly.

Pair Corralation between Hennessy Balanced and Harbor Large

Assuming the 90 days horizon Hennessy Balanced Fund is expected to generate 0.25 times more return on investment than Harbor Large. However, Hennessy Balanced Fund is 4.01 times less risky than Harbor Large. It trades about -0.17 of its potential returns per unit of risk. Harbor Large Cap is currently generating about -0.43 per unit of risk. If you would invest  1,186  in Hennessy Balanced Fund on October 15, 2024 and sell it today you would lose (14.00) from holding Hennessy Balanced Fund or give up 1.18% of portfolio value over 90 days.

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

Hennessy Balanced Fund  vs.  Harbor Large Cap

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.

Harbor Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbor Large Cap 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Hennessy Balanced and Harbor Large

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

The idea behind Hennessy Balanced Fund and Harbor Large Cap 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.