Correlation Between Hennessy Technology and Franklin Oregon

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

Diversification Opportunities for Hennessy Technology and Franklin Oregon

0.48

Correlation Coefficient

Hennessy Technology  Franklin Oregon

Very weak diversification

The 3 months correlation between Hennessy and Franklin is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Franklin Oregon Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Oregon Tax 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 Franklin Oregon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Oregon Tax has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Franklin Oregon go up and down completely randomly.

Pair Corralation between Hennessy Technology and Franklin Oregon

Assuming the 90 days horizon Hennessy Technology Fund is expected to under-perform the Franklin Oregon. In addition to that, Hennessy Technology is 4.17 times more volatile than Franklin Oregon Tax Free. It trades about -0.16 of its total potential returns per unit of risk. Franklin Oregon Tax Free is currently generating about -0.34 per unit of volatility. If you would invest  1,078  in Franklin Oregon Tax Free on October 12, 2024 and sell it today you would lose (20.00) from holding Franklin Oregon Tax Free or give up 1.86% of portfolio value over 90 days.

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

Hennessy Technology Fund  vs.  Franklin Oregon Tax Free

Hennessy Technology

Risk-Adjusted Performance

0 of 100

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 fairly strong fundamental indicators, Hennessy Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Franklin Oregon Tax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin Oregon Tax Free has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Franklin Oregon 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 Franklin Oregon

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

The idea behind Hennessy Technology Fund and Franklin Oregon Tax Free 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.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.