Correlation Between Hennessy Technology and Invesco Municipal
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and Invesco Municipal 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 Invesco Municipal 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 Invesco Municipal Income, you can compare the effects of market volatilities on Hennessy Technology and Invesco Municipal 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 Invesco Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and Invesco Municipal.
Diversification Opportunities for Hennessy Technology and Invesco Municipal
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hennessy and Invesco is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and Invesco Municipal Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Municipal Income 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 Invesco Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Municipal Income has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and Invesco Municipal go up and down completely randomly.
Pair Corralation between Hennessy Technology and Invesco Municipal
Assuming the 90 days horizon Hennessy Technology Fund is expected to under-perform the Invesco Municipal. In addition to that, Hennessy Technology is 5.55 times more volatile than Invesco Municipal Income. It trades about -0.09 of its total potential returns per unit of risk. Invesco Municipal Income is currently generating about -0.06 per unit of volatility. If you would invest 1,180 in Invesco Municipal Income on December 29, 2024 and sell it today you would lose (12.00) from holding Invesco Municipal Income or give up 1.02% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Hennessy Technology Fund vs. Invesco Municipal Income
Performance |
Timeline |
Hennessy Technology |
Invesco Municipal Income |
Hennessy Technology and Invesco Municipal Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hennessy Technology and Invesco Municipal
The main advantage of trading using opposite Hennessy Technology and Invesco Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, Invesco Municipal 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 Invesco Municipal will offset losses from the drop in Invesco Municipal's long position.Hennessy Technology vs. Black Oak Emerging | Hennessy Technology vs. Hennessy Large Cap | Hennessy Technology vs. Hennessy Japan Fund | Hennessy Technology vs. Hennessy Small Cap |
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Check out your portfolio center.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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