Correlation Between Hennessy Technology and Virtus Kar

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

Diversification Opportunities for Hennessy Technology and Virtus Kar

0.93

Correlation Coefficient

Hennessy Technology  Virtus Kar

Almost no diversification

The 3 months correlation between Hennessy and Virtus is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Virtus Kar Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virtus Kar Capital 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 Virtus Kar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virtus Kar Capital has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Virtus Kar go up and down completely randomly.

Pair Corralation between Hennessy Technology and Virtus Kar

Assuming the 90 days horizon Hennessy Technology is expected to generate 1.19 times less return on investment than Virtus Kar. In addition to that, Hennessy Technology is 2.09 times more volatile than Virtus Kar Capital. It trades about 0.08 of its total potential returns per unit of risk. Virtus Kar Capital is currently generating about 0.21 per unit of volatility. If you would invest  2,306  in Virtus Kar Capital on September 17, 2024 and sell it today you would earn a total of  73.00  from holding Virtus Kar Capital or generate 3.17% return on investment over 90 days.

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

Hennessy Technology Fund  vs.  Virtus Kar Capital

Hennessy Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Technology Fund are ranked lower than 5 (%) 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.

Virtus Kar Capital

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Hennessy Technology and Virtus Kar

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

The idea behind Hennessy Technology Fund and Virtus Kar Capital 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.