Correlation Between Financial Industries and Hennessy Large
Can any of the company-specific risk be diversified away by investing in both Financial Industries 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 Financial Industries and Hennessy Large into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Industries Fund and Hennessy Large Cap, you can compare the effects of market volatilities on Financial Industries 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 Financial Industries with a short position of Hennessy Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Industries and Hennessy Large.
Diversification Opportunities for Financial Industries and Hennessy Large
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and Hennessy is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Financial Industries Fund 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 Financial Industries 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 Financial Industries Fund 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 Financial Industries i.e., Financial Industries and Hennessy Large go up and down completely randomly.
Pair Corralation between Financial Industries and Hennessy Large
Assuming the 90 days horizon Financial Industries is expected to generate 2.07 times less return on investment than Hennessy Large. But when comparing it to its historical volatility, Financial Industries Fund is 1.42 times less risky than Hennessy Large. It trades about 0.19 of its potential returns per unit of risk. Hennessy Large Cap is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 2,838 in Hennessy Large Cap on April 30, 2025 and sell it today you would earn a total of 645.00 from holding Hennessy Large Cap or generate 22.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.39% |
| Values | Daily Returns |
Financial Industries Fund vs. Hennessy Large Cap
Performance |
| Timeline |
| Financial Industries |
| Hennessy Large Cap |
Financial Industries and Hennessy Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Industries and Hennessy Large
The main advantage of trading using opposite Financial Industries and Hennessy Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Industries 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.| Financial Industries vs. Six Circles Credit | Financial Industries vs. Shenkman Short Duration | Financial Industries vs. Pace High Yield | Financial Industries vs. Lord Abbett Short |
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Check out your portfolio center.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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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