Correlation Between Hennessy Technology and Mfs Technology

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

Diversification Opportunities for Hennessy Technology and Mfs Technology

0.91
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Hennessy and Mfs is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Mfs Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Technology 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 Mfs Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Technology has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Mfs Technology go up and down completely randomly.

Pair Corralation between Hennessy Technology and Mfs Technology

Assuming the 90 days horizon Hennessy Technology is expected to generate 1.41 times less return on investment than Mfs Technology. But when comparing it to its historical volatility, Hennessy Technology Fund is 1.0 times less risky than Mfs Technology. It trades about 0.12 of its potential returns per unit of risk. Mfs Technology Fund is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,605  in Mfs Technology Fund on September 2, 2024 and sell it today you would earn a total of  579.00  from holding Mfs Technology Fund or generate 12.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Hennessy Technology Fund  vs.  Mfs Technology Fund

 Performance 
       Timeline  
Hennessy Technology 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Technology Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Hennessy Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Mfs Technology 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Technology Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Mfs Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hennessy Technology and Mfs Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hennessy Technology and Mfs Technology

The main advantage of trading using opposite Hennessy Technology and Mfs Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, Mfs Technology 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 Mfs Technology will offset losses from the drop in Mfs Technology's long position.
The idea behind Hennessy Technology Fund and Mfs Technology Fund 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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