Correlation Between Hennessy and Hartford Growth

Can any of the company-specific risk be diversified away by investing in both Hennessy and Hartford Growth 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 Hartford Growth 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 The Hartford Growth, you can compare the effects of market volatilities on Hennessy and Hartford Growth 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 Hartford Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy and Hartford Growth.

Diversification Opportunities for Hennessy and Hartford Growth

0.4

Correlation Coefficient

Hennessy  Hartford Growth

Very weak diversification

The 3 months correlation between Hennessy and Hartford is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and The Hartford Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Growth 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 Hartford Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Growth has no effect on the direction of Hennessy i.e., Hennessy and Hartford Growth go up and down completely randomly.

Pair Corralation between Hennessy and Hartford Growth

Assuming the 90 days horizon Hennessy is expected to generate 3.98 times less return on investment than Hartford Growth. In addition to that, Hennessy is 1.12 times more volatile than The Hartford Growth. It trades about 0.03 of its total potential returns per unit of risk. The Hartford Growth is currently generating about 0.12 per unit of volatility. If you would invest  3,805  in The Hartford Growth on September 29, 2024 and sell it today you would earn a total of  3,898  from holding The Hartford Growth or generate 102.44% return on investment over 90 days.

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

Hennessy Bp Energy  vs.  The Hartford Growth

Hennessy Bp Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Bp Energy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Hennessy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Growth

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Hartford Growth are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hartford Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hennessy and Hartford Growth

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

The idea behind Hennessy Bp Energy and The Hartford 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.