Correlation Between Harbor Mid and Hennessy

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

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

Diversification Opportunities for Harbor Mid and Hennessy

0.86

Correlation Coefficient

Harbor Mid  Hennessy

Very poor diversification

The 3 months correlation between Harbor and Hennessy is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Mid Cap and Hennessy Bp Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Bp Energy and Harbor Mid 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 Mid Cap are associated (or correlated) with Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Bp Energy has no effect on the direction of Harbor Mid i.e., Harbor Mid and Hennessy go up and down completely randomly.

Pair Corralation between Harbor Mid and Hennessy

Assuming the 90 days horizon Harbor Mid Cap is expected to generate 0.88 times more return on investment than Hennessy. However, Harbor Mid Cap is 1.13 times less risky than Hennessy. It trades about 0.22 of its potential returns per unit of risk. Hennessy Bp Energy is currently generating about 0.15 per unit of risk. If you would invest  578.00  in Harbor Mid Cap on September 3, 2024 and sell it today you would earn a total of  88.00  from holding Harbor Mid Cap or generate 15.22% return on investment over 90 days.

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

Harbor Mid Cap  vs.  Hennessy Bp Energy

Harbor Mid Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Mid Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Harbor Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Hennessy Bp Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Bp Energy are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hennessy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Harbor Mid and Hennessy

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

The idea behind Harbor Mid Cap and Hennessy Bp Energy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.