Correlation Between Kensington Dynamic and Hennessy

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

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

Diversification Opportunities for Kensington Dynamic and Hennessy

-0.61

Correlation Coefficient

Kensington Dynamic  Hennessy

Excellent diversification

The 3 months correlation between Kensington and Hennessy is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kensington Dynamic Growth and Hennessy Bp Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Bp Energy and Kensington Dynamic 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 Kensington Dynamic Growth are associated (or correlated) with Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Bp Energy has no effect on the direction of Kensington Dynamic i.e., Kensington Dynamic and Hennessy go up and down completely randomly.

Pair Corralation between Kensington Dynamic and Hennessy

Assuming the 90 days horizon Kensington Dynamic Growth is expected to under-perform the Hennessy. But the mutual fund apears to be less risky and, when comparing its historical volatility, Kensington Dynamic Growth is 1.17 times less risky than Hennessy. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Hennessy Bp Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,620  in Hennessy Bp Energy on December 23, 2024 and sell it today you would earn a total of  218.00  from holding Hennessy Bp Energy or generate 8.32% return on investment over 90 days.

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

Kensington Dynamic Growth  vs.  Hennessy Bp Energy

Kensington Dynamic Growth

Risk-Adjusted Performance

Very Weak

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

Hennessy Bp Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Bp Energy are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hennessy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kensington Dynamic and Hennessy

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

The idea behind Kensington Dynamic Growth and Hennessy Bp Energy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.