Correlation Between Hennessy Small and Science Technology

Can any of the company-specific risk be diversified away by investing in both Hennessy Small and Science 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 Science 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 Science Technology Fund, you can compare the effects of market volatilities on Hennessy Small and Science 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 Science Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Small and Science Technology.

Diversification Opportunities for Hennessy Small and Science Technology

0.71

Correlation Coefficient

Hennessy Small  Science Technology

Poor diversification

The 3 months correlation between Hennessy and Science is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Small Cap and Science Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science 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 Science Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Technology has no effect on the direction of Hennessy Small i.e., Hennessy Small and Science Technology go up and down completely randomly.

Pair Corralation between Hennessy Small and Science Technology

Assuming the 90 days horizon Hennessy Small is expected to generate 1.51 times less return on investment than Science Technology. In addition to that, Hennessy Small is 1.61 times more volatile than Science Technology Fund. It trades about 0.11 of its total potential returns per unit of risk. Science Technology Fund is currently generating about 0.27 per unit of volatility. If you would invest  3,254  in Science Technology Fund on May 21, 2025 and sell it today you would earn a total of  537.00  from holding Science Technology Fund or generate 16.5% return on investment over 90 days.

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

Hennessy Small Cap  vs.  Science Technology Fund

Hennessy Small Cap

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hennessy Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Science Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Science Technology Fund are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Science Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hennessy Small and Science Technology

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

The idea behind Hennessy Small Cap and Science Technology Fund 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.