Correlation Between Harbor Large and Hennessy Balanced

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

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

Diversification Opportunities for Harbor Large and Hennessy Balanced

0.59

Correlation Coefficient

Harbor Large  Hennessy Balanced

Very weak diversification

The 3 months correlation between Harbor and Hennessy is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Large Cap and Hennessy Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Balanced and Harbor Large 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 Harbor Large Cap 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 Harbor Large i.e., Harbor Large and Hennessy Balanced go up and down completely randomly.

Pair Corralation between Harbor Large and Hennessy Balanced

Assuming the 90 days horizon Harbor Large Cap is expected to generate 2.06 times more return on investment than Hennessy Balanced. However, Harbor Large is 2.06 times more volatile than Hennessy Balanced Fund. It trades about 0.03 of its potential returns per unit of risk. Hennessy Balanced Fund is currently generating about 0.05 per unit of risk. If you would invest  1,982  in Harbor Large Cap on September 26, 2024 and sell it today you would earn a total of  224.00  from holding Harbor Large Cap or generate 11.3% return on investment over 90 days.

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

Harbor Large Cap  vs.  Hennessy Balanced Fund

Harbor Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harbor Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic 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

0 of 100

Very Weak

Over the last 90 days Hennessy Balanced Fund has generated negative risk-adjusted returns adding no value to fund investors. 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 Harbor Large and Hennessy Balanced

The main advantage of trading using opposite Harbor Large and Hennessy Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Harbor Large 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 Harbor Large Cap 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.