Correlation Between Hennessy Total and Walden Equity

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

Diversification Opportunities for Hennessy Total and Walden Equity

-0.4

Correlation Coefficient

Hennessy Total  Walden Equity

Very good diversification

The 3 months correlation between Hennessy and Walden is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Total Return and Walden Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walden Equity 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 Walden Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walden Equity has no effect on the direction of Hennessy Total i.e., Hennessy Total and Walden Equity go up and down completely randomly.

Pair Corralation between Hennessy Total and Walden Equity

Assuming the 90 days horizon Hennessy Total Return is expected to generate 0.71 times more return on investment than Walden Equity. However, Hennessy Total Return is 1.42 times less risky than Walden Equity. It trades about 0.21 of its potential returns per unit of risk. Walden Equity Fund is currently generating about -0.08 per unit of risk. If you would invest  1,308  in Hennessy Total Return on December 27, 2024 and sell it today you would earn a total of  95.00  from holding Hennessy Total Return or generate 7.26% return on investment over 90 days.

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

Hennessy Total Return  vs.  Walden Equity Fund

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 16 (%) 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.

Walden Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walden Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Walden Equity 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 Total and Walden Equity

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

The idea behind Hennessy Total Return and Walden Equity 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.