Correlation Between Queens Road and Hennessy Cornerstone

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

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

Diversification Opportunities for Queens Road and Hennessy Cornerstone

0.78

Correlation Coefficient

Queens Road  Hennessy Cornerstone

Poor diversification

The 3 months correlation between Queens and Hennessy is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Queens Road Small and Hennessy Nerstone Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Mid and Queens Road 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 Queens Road Small 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 Mid has no effect on the direction of Queens Road i.e., Queens Road and Hennessy Cornerstone go up and down completely randomly.

Pair Corralation between Queens Road and Hennessy Cornerstone

Assuming the 90 days horizon Queens Road Small is expected to generate 0.45 times more return on investment than Hennessy Cornerstone. However, Queens Road Small is 2.23 times less risky than Hennessy Cornerstone. It trades about -0.14 of its potential returns per unit of risk. Hennessy Nerstone Mid is currently generating about -0.2 per unit of risk. If you would invest  4,329  in Queens Road Small on November 28, 2024 and sell it today you would lose (350.00) from holding Queens Road Small or give up 8.09% of portfolio value over 90 days.

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

Queens Road Small  vs.  Hennessy Nerstone Mid

Queens Road Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Queens Road Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Hennessy Nerstone Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hennessy Nerstone Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Queens Road and Hennessy Cornerstone

The main advantage of trading using opposite Queens Road and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Queens Road 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 Queens Road Small and Hennessy Nerstone Mid 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.