Correlation Between Hennessy Total and Hennessy Cornerstone

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

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

Diversification Opportunities for Hennessy Total and Hennessy Cornerstone

0.98

Correlation Coefficient

Hennessy Total  Hennessy Cornerstone

Almost no diversification

The 3 months correlation between Hennessy and Hennessy is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Total Return and Hennessy Nerstone Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Value and Hennessy Total 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 Total Return are associated (or correlated) with Hennessy Cornerstone. 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 Value has no effect on the direction of Hennessy Total i.e., Hennessy Total and Hennessy Cornerstone go up and down completely randomly.

Pair Corralation between Hennessy Total and Hennessy Cornerstone

Assuming the 90 days horizon Hennessy Total is expected to generate 1.1 times less return on investment than Hennessy Cornerstone. But when comparing it to its historical volatility, Hennessy Total Return is 1.24 times less risky than Hennessy Cornerstone. It trades about 0.23 of its potential returns per unit of risk. Hennessy Nerstone Value is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,012  in Hennessy Nerstone Value on December 30, 2024 and sell it today you would earn a total of  175.00  from holding Hennessy Nerstone Value or generate 8.7% return on investment over 90 days.

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

Hennessy Total Return  vs.  Hennessy Nerstone Value

Hennessy Total Return

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Total Return are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hennessy Total may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Hennessy Nerstone Value

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Nerstone Value are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hennessy Cornerstone may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hennessy Total and Hennessy Cornerstone

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

The idea behind Hennessy Total Return and Hennessy Nerstone Value 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.