Correlation Between American Balanced and Hennessy Total
Can any of the company-specific risk be diversified away by investing in both American Balanced and Hennessy Total 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 American Balanced and Hennessy Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced Fund and Hennessy Total Return, you can compare the effects of market volatilities on American Balanced and Hennessy Total 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 American Balanced with a short position of Hennessy Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Hennessy Total.
Diversification Opportunities for American Balanced and Hennessy Total
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Hennessy is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Hennessy Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Total Return and American Balanced 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 American Balanced Fund are associated (or correlated) with Hennessy Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Total Return has no effect on the direction of American Balanced i.e., American Balanced and Hennessy Total go up and down completely randomly.
Pair Corralation between American Balanced and Hennessy Total
Assuming the 90 days horizon American Balanced Fund is expected to generate 0.88 times more return on investment than Hennessy Total. However, American Balanced Fund is 1.14 times less risky than Hennessy Total. It trades about 0.28 of its potential returns per unit of risk. Hennessy Total Return is currently generating about 0.16 per unit of risk. If you would invest 3,587 in American Balanced Fund on September 1, 2024 and sell it today you would earn a total of 103.00 from holding American Balanced Fund or generate 2.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
American Balanced Fund vs. Hennessy Total Return
Performance |
| Timeline |
| American Balanced |
| Hennessy Total Return |
American Balanced and Hennessy Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Hennessy Total
The main advantage of trading using opposite American Balanced and Hennessy Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Hennessy Total 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 Total will offset losses from the drop in Hennessy Total's long position.| American Balanced vs. Income Fund Of | American Balanced vs. Capital Income Builder | American Balanced vs. Capital World Growth | American Balanced vs. Growth Fund Of |
| Hennessy Total vs. Hennessy Balanced Fund | Hennessy Total vs. Hennessy Nerstone Value | Hennessy Total vs. Hennessy Nerstone Growth | Hennessy Total vs. Harbor Large 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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