Correlation Between Hennessy Focus and Saat Moderate

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

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

Diversification Opportunities for Hennessy Focus and Saat Moderate

0.02

Correlation Coefficient

Hennessy Focus  Saat Moderate

Significant diversification

The 3 months correlation between Hennessy and Saat is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Focus Fund and Saat Moderate Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saat Moderate Strategy and Hennessy Focus 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 Focus Fund are associated (or correlated) with Saat Moderate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saat Moderate Strategy has no effect on the direction of Hennessy Focus i.e., Hennessy Focus and Saat Moderate go up and down completely randomly.

Pair Corralation between Hennessy Focus and Saat Moderate

Assuming the 90 days horizon Hennessy Focus is expected to generate 1.67 times less return on investment than Saat Moderate. In addition to that, Hennessy Focus is 3.72 times more volatile than Saat Moderate Strategy. It trades about 0.03 of its total potential returns per unit of risk. Saat Moderate Strategy is currently generating about 0.16 per unit of volatility. If you would invest  1,624  in Saat Moderate Strategy on September 12, 2024 and sell it today you would earn a total of  274.00  from holding Saat Moderate Strategy or generate 16.87% return on investment over 90 days.

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

Hennessy Focus Fund  vs.  Saat Moderate Strategy

Hennessy Focus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Focus Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Saat Moderate Strategy

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Saat Moderate Strategy are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Saat Moderate 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 Focus and Saat Moderate

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

The idea behind Hennessy Focus Fund and Saat Moderate Strategy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.