Correlation Between Moderately Aggressive and Hennessy Technology

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

By analyzing existing cross correlation between Moderately Aggressive Balanced and Hennessy Technology Fund, you can compare the effects of market volatilities on Moderately Aggressive 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 Moderately Aggressive with a short position of Hennessy Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderately Aggressive and Hennessy Technology.

Diversification Opportunities for Moderately Aggressive and Hennessy Technology

0.97

Correlation Coefficient

Moderately Aggressive  Hennessy Technology

Almost no diversification

The 3 months correlation between Moderately and Hennessy is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Moderately Aggressive Balanced and Hennessy Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Technology and Moderately Aggressive 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 Moderately Aggressive Balanced 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 Moderately Aggressive i.e., Moderately Aggressive and Hennessy Technology go up and down completely randomly.

Pair Corralation between Moderately Aggressive and Hennessy Technology

Assuming the 90 days horizon Moderately Aggressive is expected to generate 1.52 times less return on investment than Hennessy Technology. But when comparing it to its historical volatility, Moderately Aggressive Balanced is 2.41 times less risky than Hennessy Technology. It trades about 0.25 of its potential returns per unit of risk. Hennessy Technology Fund is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,194  in Hennessy Technology Fund on May 5, 2025 and sell it today you would earn a total of  258.00  from holding Hennessy Technology Fund or generate 11.76% return on investment over 90 days.

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

Moderately Aggressive Balanced  vs.  Hennessy Technology Fund

Moderately Aggressive

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Moderately Aggressive Balanced are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Moderately Aggressive may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Hennessy Technology

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Technology Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Hennessy Technology may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Moderately Aggressive and Hennessy Technology

The main advantage of trading using opposite Moderately Aggressive and Hennessy Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moderately Aggressive 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.

The idea behind Moderately Aggressive Balanced and Hennessy 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.