Correlation Between Stellus Capital and Hennessy Capital

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

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

Diversification Opportunities for Stellus Capital and Hennessy Capital

0.85

Correlation Coefficient

Stellus Capital  Hennessy Capital

Very poor diversification

The 3 months correlation between Stellus and Hennessy is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Stellus Capital Investment and Hennessy Capital Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Capital Inv and Stellus Capital 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 Stellus Capital Investment are associated (or correlated) with Hennessy Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Capital Inv has no effect on the direction of Stellus Capital i.e., Stellus Capital and Hennessy Capital go up and down completely randomly.

Pair Corralation between Stellus Capital and Hennessy Capital

Considering the 90-day investment horizon Stellus Capital Investment is expected to generate 3.77 times more return on investment than Hennessy Capital. However, Stellus Capital is 3.77 times more volatile than Hennessy Capital Investment. It trades about 0.26 of its potential returns per unit of risk. Hennessy Capital Investment is currently generating about 0.14 per unit of risk. If you would invest  1,343  in Stellus Capital Investment on December 1, 2024 and sell it today you would earn a total of  184.00  from holding Stellus Capital Investment or generate 13.7% return on investment over 90 days.

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

Stellus Capital Investment  vs.  Hennessy Capital Investment

Stellus Capital Inve

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stellus Capital Investment are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Stellus Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

Hennessy Capital Inv

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Capital Investment are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, Hennessy Capital is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Stellus Capital and Hennessy Capital

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

The idea behind Stellus Capital Investment and Hennessy Capital Investment 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..