Correlation Between Morningstar Defensive and Hennessy Focus
Can any of the company-specific risk be diversified away by investing in both Morningstar Defensive and Hennessy Focus 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 Morningstar Defensive and Hennessy Focus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Morningstar Defensive Bond and Hennessy Focus Fund, you can compare the effects of market volatilities on Morningstar Defensive and Hennessy Focus 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 Morningstar Defensive with a short position of Hennessy Focus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Defensive and Hennessy Focus.
Diversification Opportunities for Morningstar Defensive and Hennessy Focus
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Morningstar and Hennessy is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Defensive Bond and Hennessy Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Focus and Morningstar Defensive 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 Morningstar Defensive Bond are associated (or correlated) with Hennessy Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Focus has no effect on the direction of Morningstar Defensive i.e., Morningstar Defensive and Hennessy Focus go up and down completely randomly.
Pair Corralation between Morningstar Defensive and Hennessy Focus
Assuming the 90 days horizon Morningstar Defensive Bond is expected to generate 0.07 times more return on investment than Hennessy Focus. However, Morningstar Defensive Bond is 15.36 times less risky than Hennessy Focus. It trades about -0.08 of its potential returns per unit of risk. Hennessy Focus Fund is currently generating about -0.1 per unit of risk. If you would invest 980.00 in Morningstar Defensive Bond on September 15, 2024 and sell it today you would lose (7.00) from holding Morningstar Defensive Bond or give up 0.71% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Morningstar Defensive Bond vs. Hennessy Focus Fund
Performance |
Timeline |
Morningstar Defensive |
Hennessy Focus |
Morningstar Defensive and Hennessy Focus Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Morningstar Defensive and Hennessy Focus
The main advantage of trading using opposite Morningstar Defensive and Hennessy Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar Defensive position performs unexpectedly, Hennessy Focus 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 Focus will offset losses from the drop in Hennessy Focus' long position.The idea behind Morningstar Defensive Bond and Hennessy Focus Fund 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.
Hennessy Focus vs. Legg Mason Global | Hennessy Focus vs. Qs Global Equity | Hennessy Focus vs. Mirova Global Green | Hennessy Focus vs. Ab Global Risk |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |