Correlation Between Hennessy Technology and Morgan Stanley

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

Diversification Opportunities for Hennessy Technology and Morgan Stanley

0.17

Correlation Coefficient

Hennessy Technology  Morgan Stanley

Average diversification

The 3 months correlation between Hennessy and Morgan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Morgan Stanley Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley Insti has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Morgan Stanley go up and down completely randomly.

Pair Corralation between Hennessy Technology and Morgan Stanley

Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 0.13 times more return on investment than Morgan Stanley. However, Hennessy Technology Fund is 7.42 times less risky than Morgan Stanley. It trades about 0.03 of its potential returns per unit of risk. Morgan Stanley Institutional is currently generating about -0.12 per unit of risk. If you would invest  2,242  in Hennessy Technology Fund on October 6, 2024 and sell it today you would earn a total of  53.00  from holding Hennessy Technology Fund or generate 2.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Hennessy Technology Fund  vs.  Morgan Stanley Institutional

Hennessy Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Technology Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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.

Morgan Stanley Insti

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morgan Stanley Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Hennessy Technology and Morgan Stanley

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

The idea behind Hennessy Technology Fund and Morgan Stanley Institutional 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.