Correlation Between Hennessy and Invesco Quality

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

Diversification Opportunities for Hennessy and Invesco Quality

-0.08

Correlation Coefficient

Hennessy  Invesco Quality

Good diversification

The 3 months correlation between Hennessy and INVESCO is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Bp Energy and Invesco Quality Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Quality Income 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 Invesco Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Quality Income has no effect on the direction of Hennessy i.e., Hennessy and Invesco Quality go up and down completely randomly.

Pair Corralation between Hennessy and Invesco Quality

Assuming the 90 days horizon Hennessy Bp Energy is expected to generate 3.58 times more return on investment than Invesco Quality. However, Hennessy is 3.58 times more volatile than Invesco Quality Income. It trades about 0.12 of its potential returns per unit of risk. Invesco Quality Income is currently generating about 0.17 per unit of risk. If you would invest  2,620  in Hennessy Bp Energy on December 22, 2024 and sell it today you would earn a total of  218.00  from holding Hennessy Bp Energy or generate 8.32% return on investment over 90 days.

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

Hennessy Bp Energy  vs.  Invesco Quality Income

Hennessy Bp Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Bp Energy are ranked lower than 9 (%) 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 April 2025.

Invesco Quality Income

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Quality Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Invesco Quality 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 Invesco Quality

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

The idea behind Hennessy Bp Energy and Invesco Quality Income 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.