Correlation Between Hennessy Japan and Polen Global

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

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

Diversification Opportunities for Hennessy Japan and Polen Global

0.17

Correlation Coefficient

Hennessy Japan  Polen Global

Average diversification

The 3 months correlation between Hennessy and Polen is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Japan Fund and Polen Global Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polen Global Growth and Hennessy Japan 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 Japan Fund are associated (or correlated) with Polen Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polen Global Growth has no effect on the direction of Hennessy Japan i.e., Hennessy Japan and Polen Global go up and down completely randomly.

Pair Corralation between Hennessy Japan and Polen Global

Assuming the 90 days horizon Hennessy Japan Fund is expected to generate 0.95 times more return on investment than Polen Global. However, Hennessy Japan Fund is 1.05 times less risky than Polen Global. It trades about 0.03 of its potential returns per unit of risk. Polen Global Growth is currently generating about -0.09 per unit of risk. If you would invest  4,138  in Hennessy Japan Fund on December 29, 2024 and sell it today you would earn a total of  69.00  from holding Hennessy Japan Fund or generate 1.67% return on investment over 90 days.

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

Hennessy Japan Fund  vs.  Polen Global Growth

Hennessy Japan

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Japan Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Hennessy Japan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polen Global Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polen Global Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Polen Global 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 Japan and Polen Global

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

The idea behind Hennessy Japan Fund and Polen Global Growth 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.