Correlation Between Innovator Equity and Hennessy Stance

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

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

Diversification Opportunities for Innovator Equity and Hennessy Stance

0.26

Correlation Coefficient

Innovator Equity  Hennessy Stance

Modest diversification

The 3 months correlation between Innovator and Hennessy is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Innovator Equity Accelerated and Hennessy Stance ESG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Stance ESG and Innovator Equity 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 Innovator Equity Accelerated are associated (or correlated) with Hennessy Stance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Stance ESG has no effect on the direction of Innovator Equity i.e., Innovator Equity and Hennessy Stance go up and down completely randomly.

Pair Corralation between Innovator Equity and Hennessy Stance

Given the investment horizon of 90 days Innovator Equity Accelerated is expected to generate 0.44 times more return on investment than Hennessy Stance. However, Innovator Equity Accelerated is 2.29 times less risky than Hennessy Stance. It trades about -0.02 of its potential returns per unit of risk. Hennessy Stance ESG is currently generating about -0.24 per unit of risk. If you would invest  3,421  in Innovator Equity Accelerated on October 12, 2024 and sell it today you would lose (4.00) from holding Innovator Equity Accelerated or give up 0.12% of portfolio value over 90 days.

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

Innovator Equity Accelerated  vs.  Hennessy Stance ESG

Innovator Equity Acc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator Equity Accelerated are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innovator Equity is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Hennessy Stance ESG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Stance ESG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Hennessy Stance is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Innovator Equity and Hennessy Stance

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

The idea behind Innovator Equity Accelerated and Hennessy Stance ESG 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.