Correlation Between Arrow Managed and Hennessy

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

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

Diversification Opportunities for Arrow Managed and Hennessy

0.25

Correlation Coefficient

Arrow Managed  Hennessy

Modest diversification

The 3 months correlation between Arrow and Hennessy is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Managed Futures 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 Arrow Managed 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 Arrow Managed Futures 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 Arrow Managed i.e., Arrow Managed and Hennessy go up and down completely randomly.

Pair Corralation between Arrow Managed and Hennessy

Assuming the 90 days horizon Arrow Managed is expected to generate 24.87 times less return on investment than Hennessy. In addition to that, Arrow Managed is 1.17 times more volatile than Hennessy Bp Energy. It trades about 0.01 of its total potential returns per unit of risk. Hennessy Bp Energy is currently generating about 0.37 per unit of volatility. If you would invest  2,690  in Hennessy Bp Energy on October 17, 2024 and sell it today you would earn a total of  208.00  from holding Hennessy Bp Energy or generate 7.73% return on investment over 90 days.

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

Arrow Managed Futures  vs.  Hennessy Bp Energy

Arrow Managed Futures

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Managed Futures are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Arrow Managed 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

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Bp Energy are ranked lower than 8 (%) 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 February 2025.

Pair Trading with Arrow Managed and Hennessy

The main advantage of trading using opposite Arrow Managed and Hennessy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Managed 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 Arrow Managed Futures 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.