Correlation Between Hennessy Small and Hennessy Technology
Can any of the company-specific risk be diversified away by investing in both Hennessy Small and Hennessy Technology 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 Hennessy Small and Hennessy Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Small Cap and Hennessy Technology Fund, you can compare the effects of market volatilities on Hennessy Small and Hennessy Technology 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 Hennessy Small with a short position of Hennessy Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Small and Hennessy Technology.
Diversification Opportunities for Hennessy Small and Hennessy Technology
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and Hennessy is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Small Cap and Hennessy Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Technology and Hennessy Small 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 Hennessy Small Cap are associated (or correlated) with Hennessy Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Technology has no effect on the direction of Hennessy Small i.e., Hennessy Small and Hennessy Technology go up and down completely randomly.
Pair Corralation between Hennessy Small and Hennessy Technology
Assuming the 90 days horizon Hennessy Small Cap is expected to generate 1.5 times more return on investment than Hennessy Technology. However, Hennessy Small is 1.5 times more volatile than Hennessy Technology Fund. It trades about 0.18 of its potential returns per unit of risk. Hennessy Technology Fund is currently generating about 0.16 per unit of risk. If you would invest 2,475 in Hennessy Small Cap on June 1, 2025 and sell it today you would earn a total of 468.00 from holding Hennessy Small Cap or generate 18.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Small Cap vs. Hennessy Technology Fund
Performance |
| Timeline |
| Hennessy Small Cap |
| Hennessy Technology |
Hennessy Small and Hennessy Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Small and Hennessy Technology
The main advantage of trading using opposite Hennessy Small and Hennessy Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Small position performs unexpectedly, Hennessy Technology 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 Technology will offset losses from the drop in Hennessy Technology's long position.| Hennessy Small vs. Hennessy Large Cap | Hennessy Small vs. Rmb Mendon Financial | Hennessy Small vs. Hennessy Focus Fund | Hennessy Small vs. Rmb Mendon Financial |
| Hennessy Technology vs. Black Oak Emerging | Hennessy Technology vs. Hennessy Large Cap | Hennessy Technology vs. Hennessy Japan Fund | Hennessy Technology vs. Hennessy Small Cap |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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