Correlation Between Hennessy and Destinations Small
Can any of the company-specific risk be diversified away by investing in both Hennessy and Destinations Small 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 Destinations Small 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 Destinations Small Mid Cap, you can compare the effects of market volatilities on Hennessy and Destinations Small 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 Destinations Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Destinations Small.
Diversification Opportunities for Hennessy and Destinations Small
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Destinations is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Destinations Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Small Mid 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 Destinations Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Small Mid has no effect on the direction of Hennessy i.e., Hennessy and Destinations Small go up and down completely randomly.
Pair Corralation between Hennessy and Destinations Small
Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 0.46 times more return on investment than Destinations Small. However, Hennessy Bp Energy is 2.19 times less risky than Destinations Small. It trades about -0.35 of its potential returns per unit of risk. Destinations Small Mid Cap is currently generating about -0.25 per unit of risk. If you would invest 2,855 in Hennessy Bp Energy on September 26, 2024 and sell it today you would lose (233.00) from holding Hennessy Bp Energy or give up 8.16% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Hennessy Bp Energy vs. Destinations Small Mid Cap
Performance |
Timeline |
Hennessy Bp Energy |
Destinations Small Mid |
Hennessy and Destinations Small Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hennessy and Destinations Small
The main advantage of trading using opposite Hennessy and Destinations Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy position performs unexpectedly, Destinations Small 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 Destinations Small will offset losses from the drop in Destinations Small'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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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