Correlation Between Rmb Mendon and Hennessy Large

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

By analyzing existing cross correlation between Rmb Mendon Financial and Hennessy Large Cap, you can compare the effects of market volatilities on Rmb Mendon and Hennessy Large 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 Rmb Mendon with a short position of Hennessy Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rmb Mendon and Hennessy Large.

Diversification Opportunities for Rmb Mendon and Hennessy Large

0.91

Correlation Coefficient

Rmb Mendon  Hennessy Large

Almost no diversification

The 3 months correlation between RMB and Hennessy is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Rmb Mendon Financial and Hennessy Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Large Cap and Rmb Mendon 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 Rmb Mendon Financial are associated (or correlated) with Hennessy Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Large Cap has no effect on the direction of Rmb Mendon i.e., Rmb Mendon and Hennessy Large go up and down completely randomly.

Pair Corralation between Rmb Mendon and Hennessy Large

Assuming the 90 days horizon Rmb Mendon Financial is expected to under-perform the Hennessy Large. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rmb Mendon Financial is 1.09 times less risky than Hennessy Large. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Hennessy Large Cap is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,948  in Hennessy Large Cap on December 28, 2024 and sell it today you would lose (39.00) from holding Hennessy Large Cap or give up 1.32% of portfolio value over 90 days.

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

Rmb Mendon Financial  vs.  Hennessy Large Cap

Rmb Mendon Financial

Risk-Adjusted Performance

Very Weak

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

Hennessy Large Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rmb Mendon and Hennessy Large

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

The idea behind Rmb Mendon Financial and Hennessy Large Cap 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..