Correlation Between T Rowe and Hennessy Focus

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

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

Diversification Opportunities for T Rowe and Hennessy Focus

-0.06

Correlation Coefficient

T Rowe  Hennessy Focus

Good diversification

The 3 months correlation between TQAAX and Hennessy is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and Hennessy Focus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Focus and T Rowe 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 T Rowe Price 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 T Rowe i.e., T Rowe and Hennessy Focus go up and down completely randomly.

Pair Corralation between T Rowe and Hennessy Focus

Assuming the 90 days horizon T Rowe Price is expected to generate 0.5 times more return on investment than Hennessy Focus. However, T Rowe Price is 1.99 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  4,561  in T Rowe Price on September 16, 2024 and sell it today you would earn a total of  230.00  from holding T Rowe Price or generate 5.04% return on investment over 90 days.

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

T Rowe Price  vs.  Hennessy Focus Fund

T Rowe Price

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hennessy Focus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Focus Fund 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 forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with T Rowe and Hennessy Focus

The main advantage of trading using opposite T Rowe and Hennessy Focus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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 T Rowe Price 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.