Correlation Between Hennessy Technology and Upright Growth

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

Diversification Opportunities for Hennessy Technology and Upright Growth

0.4

Correlation Coefficient

Hennessy Technology  Upright Growth

Very weak diversification

The 3 months correlation between Hennessy and Upright is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Upright Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upright Growth 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 Upright Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upright Growth has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Upright Growth go up and down completely randomly.

Pair Corralation between Hennessy Technology and Upright Growth

Assuming the 90 days horizon Hennessy Technology is expected to generate 3.72 times less return on investment than Upright Growth. But when comparing it to its historical volatility, Hennessy Technology Fund is 1.21 times less risky than Upright Growth. It trades about 0.07 of its potential returns per unit of risk. Upright Growth Fund is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  911.00  in Upright Growth Fund on September 15, 2024 and sell it today you would earn a total of  216.00  from holding Upright Growth Fund or generate 23.71% return on investment over 90 days.

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

Hennessy Technology Fund  vs.  Upright Growth Fund

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.

Upright Growth

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Upright Growth Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Upright Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hennessy Technology and Upright Growth

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

The idea behind Hennessy Technology Fund and Upright Growth 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.