Correlation Between Hennessy Technology and Eaton Vance

Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and Eaton Vance 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 Technology and Eaton Vance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hennessy Technology Fund and Eaton Vance Municipal, you can compare the effects of market volatilities on Hennessy Technology and Eaton Vance 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 Technology with a short position of Eaton Vance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and Eaton Vance.

Diversification Opportunities for Hennessy Technology and Eaton Vance

-0.14

Correlation Coefficient

Hennessy Technology  Eaton Vance

Good diversification

The 3 months correlation between Hennessy and Eaton is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Eaton Vance Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eaton Vance Municipal and Hennessy Technology 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 Technology Fund are associated (or correlated) with Eaton Vance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eaton Vance Municipal has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Eaton Vance go up and down completely randomly.

Pair Corralation between Hennessy Technology and Eaton Vance

Assuming the 90 days horizon Hennessy Technology Fund is expected to under-perform the Eaton Vance. In addition to that, Hennessy Technology is 6.11 times more volatile than Eaton Vance Municipal. It trades about -0.08 of its total potential returns per unit of risk. Eaton Vance Municipal is currently generating about 0.07 per unit of volatility. If you would invest  1,120  in Eaton Vance Municipal on December 22, 2024 and sell it today you would earn a total of  11.00  from holding Eaton Vance Municipal or generate 0.98% return on investment over 90 days.

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

Hennessy Technology Fund  vs.  Eaton Vance Municipal

Hennessy Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hennessy Technology Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Eaton Vance Municipal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eaton Vance Municipal are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Eaton Vance 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 Technology and Eaton Vance

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

The idea behind Hennessy Technology Fund and Eaton Vance Municipal 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.