Correlation Between Hennessy Cornerstone and Hennessy Total

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

Diversification Opportunities for Hennessy Cornerstone and Hennessy Total

0.24

Correlation Coefficient

Hennessy Cornerstone  Hennessy Total

Modest diversification

The 3 months correlation between Hennessy and Hennessy is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Large and Hennessy Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Total Return 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 Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Total Return has no effect on the direction of Hennessy Cornerstone i.e., Hennessy Cornerstone and Hennessy Total go up and down completely randomly.

Pair Corralation between Hennessy Cornerstone and Hennessy Total

Assuming the 90 days horizon Hennessy Nerstone Large is expected to under-perform the Hennessy Total. In addition to that, Hennessy Cornerstone is 1.69 times more volatile than Hennessy Total Return. It trades about -0.19 of its total potential returns per unit of risk. Hennessy Total Return is currently generating about 0.14 per unit of volatility. If you would invest  1,352  in Hennessy Total Return on December 4, 2024 and sell it today you would earn a total of  57.00  from holding Hennessy Total Return or generate 4.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Hennessy Nerstone Large  vs.  Hennessy Total Return

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 Total Return

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Total Return are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Hennessy Total 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 Total

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

The idea behind Hennessy Nerstone Large and Hennessy Total Return 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.