Correlation Between Vanguard Energy and Hennessy

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

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

Diversification Opportunities for Vanguard Energy and Hennessy

0.36

Correlation Coefficient

Vanguard Energy  Hennessy

Weak diversification

The 3 months correlation between Vanguard and Hennessy is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Energy Fund and Hennessy Bp Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Bp Energy and Vanguard Energy 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 Vanguard Energy Fund are associated (or correlated) with Hennessy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Bp Energy has no effect on the direction of Vanguard Energy i.e., Vanguard Energy and Hennessy go up and down completely randomly.

Pair Corralation between Vanguard Energy and Hennessy

Assuming the 90 days horizon Vanguard Energy Fund is expected to under-perform the Hennessy. In addition to that, Vanguard Energy is 2.69 times more volatile than Hennessy Bp Energy. It trades about -0.26 of its total potential returns per unit of risk. Hennessy Bp Energy is currently generating about -0.03 per unit of volatility. If you would invest  2,756  in Hennessy Bp Energy on October 9, 2024 and sell it today you would lose (21.00) from holding Hennessy Bp Energy or give up 0.76% of portfolio value over 90 days.

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

Vanguard Energy Fund  vs.  Hennessy Bp Energy

Vanguard Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Energy 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Hennessy Bp Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Bp Energy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Hennessy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Energy and Hennessy

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

The idea behind Vanguard Energy Fund and Hennessy Bp Energy 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.