Correlation Between Hennessy and Tcw High

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

Diversification Opportunities for Hennessy and Tcw High

0.05

Correlation Coefficient

Hennessy  Tcw High

Significant diversification

The 3 months correlation between Hennessy and Tcw is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Tcw High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tcw High Yield 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 Tcw High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tcw High Yield has no effect on the direction of Hennessy i.e., Hennessy and Tcw High go up and down completely randomly.

Pair Corralation between Hennessy and Tcw High

Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 6.16 times more return on investment than Tcw High. However, Hennessy is 6.16 times more volatile than Tcw High Yield. It trades about 0.05 of its potential returns per unit of risk. Tcw High Yield is currently generating about 0.13 per unit of risk. If you would invest  2,014  in Hennessy Bp Energy on December 4, 2024 and sell it today you would earn a total of  678.00  from holding Hennessy Bp Energy or generate 33.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.91%
Values	Daily Returns

Hennessy Bp Energy  vs.  Tcw High Yield

Hennessy Bp Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hennessy Bp Energy has generated negative risk-adjusted returns adding no value to fund investors. 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.

Tcw High Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tcw High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Tcw High 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 and Tcw High

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

The idea behind Hennessy Bp Energy and Tcw High Yield 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.