Correlation Between Hennessy Technology and Vanguard Information

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

Diversification Opportunities for Hennessy Technology and Vanguard Information

0.62

Correlation Coefficient

Hennessy Technology  Vanguard Information

Poor diversification

The 3 months correlation between Hennessy and Vanguard is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Vanguard Information Technolog in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Information 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 Vanguard Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Information has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Vanguard Information go up and down completely randomly.

Pair Corralation between Hennessy Technology and Vanguard Information

Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 0.61 times more return on investment than Vanguard Information. However, Hennessy Technology Fund is 1.63 times less risky than Vanguard Information. It trades about 0.18 of its potential returns per unit of risk. Vanguard Information Technology is currently generating about 0.0 per unit of risk. If you would invest  2,268  in Hennessy Technology Fund on November 1, 2024 and sell it today you would earn a total of  92.00  from holding Hennessy Technology Fund or generate 4.06% return on investment over 90 days.

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

Hennessy Technology Fund  vs.  Vanguard Information Technolog

Hennessy Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Technology Fund are ranked lower than 4 (%) 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.

Vanguard Information

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Information Technology are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Information may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Hennessy Technology and Vanguard Information

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

The idea behind Hennessy Technology Fund and Vanguard Information Technology 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.