Correlation Between Hennessy Technology and Alphacentric Lifesci

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

Diversification Opportunities for Hennessy Technology and Alphacentric Lifesci

0.23

Correlation Coefficient

Hennessy Technology  Alphacentric Lifesci

Modest diversification

The 3 months correlation between Hennessy and Alphacentric is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Alphacentric Lifesci Healthcar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphacentric Lifesci 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 Alphacentric Lifesci. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphacentric Lifesci has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Alphacentric Lifesci go up and down completely randomly.

Pair Corralation between Hennessy Technology and Alphacentric Lifesci

Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 1.34 times more return on investment than Alphacentric Lifesci. However, Hennessy Technology is 1.34 times more volatile than Alphacentric Lifesci Healthcare. It trades about -0.11 of its potential returns per unit of risk. Alphacentric Lifesci Healthcare is currently generating about -0.26 per unit of risk. If you would invest  2,355  in Hennessy Technology Fund on October 11, 2024 and sell it today you would lose (65.00) from holding Hennessy Technology Fund or give up 2.76% of portfolio value over 90 days.

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

Hennessy Technology Fund  vs.  Alphacentric Lifesci Healthcar

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.

Alphacentric Lifesci

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alphacentric Lifesci Healthcare has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Alphacentric Lifesci 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 Alphacentric Lifesci

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

The idea behind Hennessy Technology Fund and Alphacentric Lifesci Healthcare 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.