Correlation Between Hennessy Cornerstone and Hennessy Balanced

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

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

Diversification Opportunities for Hennessy Cornerstone and Hennessy Balanced

0.4

Correlation Coefficient

Hennessy Cornerstone  Hennessy Balanced

Very weak diversification

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

Pair Corralation between Hennessy Cornerstone and Hennessy Balanced

Assuming the 90 days horizon Hennessy Nerstone Large is expected to generate 2.3 times more return on investment than Hennessy Balanced. However, Hennessy Cornerstone is 2.3 times more volatile than Hennessy Balanced Fund. It trades about 0.05 of its potential returns per unit of risk. Hennessy Balanced Fund is currently generating about 0.09 per unit of risk. If you would invest  918.00  in Hennessy Nerstone Large on December 4, 2024 and sell it today you would earn a total of  197.00  from holding Hennessy Nerstone Large or generate 21.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Hennessy Nerstone Large  vs.  Hennessy Balanced Fund

Hennessy Nerstone Large

Risk-Adjusted Performance

Very Weak

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

Hennessy Balanced

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Balanced Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Hennessy Cornerstone and Hennessy Balanced

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

The idea behind Hennessy Nerstone Large and Hennessy Balanced 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.