Correlation Between Hennessy Technology and Goldman Sachs

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

Diversification Opportunities for Hennessy Technology and Goldman Sachs

-0.41

Correlation Coefficient

Hennessy Technology  Goldman Sachs

Very good diversification

The 3 months correlation between Hennessy and Goldman is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Goldman Sachs Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs Asia 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs Asia has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Goldman Sachs go up and down completely randomly.

Pair Corralation between Hennessy Technology and Goldman Sachs

Assuming the 90 days horizon Hennessy Technology Fund is expected to under-perform the Goldman Sachs. In addition to that, Hennessy Technology is 1.04 times more volatile than Goldman Sachs Asia. It trades about -0.08 of its total potential returns per unit of risk. Goldman Sachs Asia is currently generating about 0.17 per unit of volatility. If you would invest  2,128  in Goldman Sachs Asia on December 23, 2024 and sell it today you would earn a total of  295.00  from holding Goldman Sachs Asia or generate 13.86% return on investment over 90 days.

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

Hennessy Technology Fund  vs.  Goldman Sachs Asia

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.

Goldman Sachs Asia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Goldman Sachs Asia are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Goldman Sachs showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hennessy Technology and Goldman Sachs

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

The idea behind Hennessy Technology Fund and Goldman Sachs Asia 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .