Correlation Between Pimco Low and Hennessy Technology

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

By analyzing existing cross correlation between Pimco Low Duration and Hennessy Technology Fund, you can compare the effects of market volatilities on Pimco Low and Hennessy Technology 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 Pimco Low with a short position of Hennessy Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pimco Low and Hennessy Technology.

Diversification Opportunities for Pimco Low and Hennessy Technology

0.45

Correlation Coefficient

Pimco Low  Hennessy Technology

Very weak diversification

The 3 months correlation between Pimco and Hennessy is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Pimco Low Duration and Hennessy Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Technology and Pimco Low 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 Pimco Low Duration are associated (or correlated) with Hennessy Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Technology has no effect on the direction of Pimco Low i.e., Pimco Low and Hennessy Technology go up and down completely randomly.

Pair Corralation between Pimco Low and Hennessy Technology

Assuming the 90 days horizon Pimco Low is expected to generate 2.17 times less return on investment than Hennessy Technology. But when comparing it to its historical volatility, Pimco Low Duration is 5.27 times less risky than Hennessy Technology. It trades about 0.22 of its potential returns per unit of risk. Hennessy Technology Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,303  in Hennessy Technology Fund on October 23, 2024 and sell it today you would earn a total of  36.00  from holding Hennessy Technology Fund or generate 1.56% return on investment over 90 days.

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

Pimco Low Duration  vs.  Hennessy Technology Fund

Pimco Low Duration

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pimco Low Duration are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Pimco Low is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hennessy Technology

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Technology Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Hennessy Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pimco Low and Hennessy Technology

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

The idea behind Pimco Low Duration and Hennessy Technology 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.