Correlation Between Center Coast and Hennessy Japan

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

By analyzing existing cross correlation between Center St Brookfield and Hennessy Japan Small, you can compare the effects of market volatilities on Center Coast and Hennessy Japan 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 Center Coast with a short position of Hennessy Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Center Coast and Hennessy Japan.

Diversification Opportunities for Center Coast and Hennessy Japan

0.9

Correlation Coefficient

Center Coast  Hennessy Japan

Almost no diversification

The 3 months correlation between Center and Hennessy is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Center St Brookfield and Hennessy Japan Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Japan Small and Center Coast 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 Center St Brookfield are associated (or correlated) with Hennessy Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Japan Small has no effect on the direction of Center Coast i.e., Center Coast and Hennessy Japan go up and down completely randomly.

Pair Corralation between Center Coast and Hennessy Japan

Assuming the 90 days horizon Center Coast is expected to generate 3.08 times less return on investment than Hennessy Japan. But when comparing it to its historical volatility, Center St Brookfield is 4.2 times less risky than Hennessy Japan. It trades about 0.25 of its potential returns per unit of risk. Hennessy Japan Small is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,812  in Hennessy Japan Small on May 3, 2025 and sell it today you would earn a total of  165.00  from holding Hennessy Japan Small or generate 9.11% return on investment over 90 days.

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

Center St Brookfield  vs.  Hennessy Japan Small

Center St Brookfield

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Center St Brookfield are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Center Coast is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hennessy Japan Small

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Japan Small are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Hennessy Japan may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Center Coast and Hennessy Japan

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

The idea behind Center St Brookfield and Hennessy Japan Small 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.