Correlation Between Hennessy Capital and Digital Transformation

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

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

Diversification Opportunities for Hennessy Capital and Digital Transformation

0.32

Correlation Coefficient

Hennessy Capital  Digital Transformation

Weak diversification

The 3 months correlation between Hennessy and Digital is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Capital Investment and Digital Transformation Opportu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Transformation and Hennessy Capital 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 Capital Investment are associated (or correlated) with Digital Transformation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Transformation has no effect on the direction of Hennessy Capital i.e., Hennessy Capital and Digital Transformation go up and down completely randomly.

Pair Corralation between Hennessy Capital and Digital Transformation

Given the investment horizon of 90 days Hennessy Capital is expected to generate 1.91 times less return on investment than Digital Transformation. In addition to that, Hennessy Capital is 1.32 times more volatile than Digital Transformation Opportunities. It trades about 0.02 of its total potential returns per unit of risk. Digital Transformation Opportunities is currently generating about 0.05 per unit of volatility. If you would invest  1,010  in Digital Transformation Opportunities on October 10, 2024 and sell it today you would earn a total of  38.00  from holding Digital Transformation Opportunities or generate 3.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	26.06%
Values	Daily Returns

Hennessy Capital Investment  vs.  Digital Transformation Opportu

Hennessy Capital Inv

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Capital Investment are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Hennessy Capital is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Digital Transformation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Transformation Opportunities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Digital Transformation is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hennessy Capital and Digital Transformation

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

The idea behind Hennessy Capital Investment and Digital Transformation Opportunities 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.