Correlation Between The Jensen and Hennessy Cornerstone

Can any of the company-specific risk be diversified away by investing in both The Jensen and Hennessy Cornerstone 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 The Jensen and Hennessy Cornerstone into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Jensen Portfolio and Hennessy Nerstone Growth, you can compare the effects of market volatilities on The Jensen and Hennessy Cornerstone 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 The Jensen with a short position of Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Jensen and Hennessy Cornerstone.

Diversification Opportunities for The Jensen and Hennessy Cornerstone

0.71

Correlation Coefficient

The Jensen  Hennessy Cornerstone

Poor diversification

The 3 months correlation between The and Hennessy is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding The Jensen Portfolio and Hennessy Nerstone Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Growth and The Jensen 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 The Jensen Portfolio are associated (or correlated) with Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Growth has no effect on the direction of The Jensen i.e., The Jensen and Hennessy Cornerstone go up and down completely randomly.

Pair Corralation between The Jensen and Hennessy Cornerstone

Assuming the 90 days horizon The Jensen Portfolio is expected to under-perform the Hennessy Cornerstone. But the mutual fund apears to be less risky and, when comparing its historical volatility, The Jensen Portfolio is 1.88 times less risky than Hennessy Cornerstone. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Hennessy Nerstone Growth is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,172  in Hennessy Nerstone Growth on December 29, 2024 and sell it today you would lose (91.00) from holding Hennessy Nerstone Growth or give up 2.87% of portfolio value over 90 days.

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

The Jensen Portfolio  vs.  Hennessy Nerstone Growth

Jensen Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Jensen Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, The Jensen is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hennessy Nerstone Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hennessy Nerstone Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Hennessy Cornerstone is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The Jensen and Hennessy Cornerstone

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

The idea behind The Jensen Portfolio and Hennessy Nerstone Growth 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.