Correlation Between Hennessy and Dodge Cox
Can any of the company-specific risk be diversified away by investing in both Hennessy and Dodge Cox 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 and Dodge Cox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Bp Energy and Dodge Cox Stock, you can compare the effects of market volatilities on Hennessy and Dodge Cox 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 with a short position of Dodge Cox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Dodge Cox.
Diversification Opportunities for Hennessy and Dodge Cox
Poor diversification
The 3 months correlation between Hennessy and Dodge is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Dodge Cox Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dodge Cox Stock and Hennessy 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 Bp Energy are associated (or correlated) with Dodge Cox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dodge Cox Stock has no effect on the direction of Hennessy i.e., Hennessy and Dodge Cox go up and down completely randomly.
Pair Corralation between Hennessy and Dodge Cox
Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 1.13 times more return on investment than Dodge Cox. However, Hennessy is 1.13 times more volatile than Dodge Cox Stock. It trades about -0.02 of its potential returns per unit of risk. Dodge Cox Stock is currently generating about -0.07 per unit of risk. If you would invest 2,649 in Hennessy Bp Energy on September 24, 2024 and sell it today you would lose (57.00) from holding Hennessy Bp Energy or give up 2.15% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Hennessy Bp Energy vs. Dodge Cox Stock
Performance |
Timeline |
Hennessy Bp Energy |
Dodge Cox Stock |
Hennessy and Dodge Cox Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hennessy and Dodge Cox
The main advantage of trading using opposite Hennessy and Dodge Cox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy position performs unexpectedly, Dodge Cox 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 Dodge Cox will offset losses from the drop in Dodge Cox's long position.Hennessy vs. World Energy Fund | Hennessy vs. Ivy Energy Fund | Hennessy vs. Blackrock All Cap Energy | Hennessy vs. Energy Fund Class |
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Check out your portfolio center.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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