Correlation Between American Funds and Hennessy Technology
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and Hennessy Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2010 and Hennessy Technology Fund, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of Hennessy Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Hennessy Technology.
Diversification Opportunities for American Funds and Hennessy Technology
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and Hennessy is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2010 and Hennessy Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Technology and American Funds 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 Funds 2010 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 American Funds i.e., American Funds and Hennessy Technology go up and down completely randomly.
Pair Corralation between American Funds and Hennessy Technology
Assuming the 90 days horizon American Funds is expected to generate 2.31 times less return on investment than Hennessy Technology. But when comparing it to its historical volatility, American Funds 2010 is 2.27 times less risky than Hennessy Technology. It trades about 0.08 of its potential returns per unit of risk. Hennessy Technology Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,479 in Hennessy Technology Fund on September 12, 2024 and sell it today you would earn a total of 903.00 from holding Hennessy Technology Fund or generate 61.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds 2010 vs. Hennessy Technology Fund
Performance |
| Timeline |
| American Funds 2010 |
| Hennessy Technology |
American Funds and Hennessy Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Hennessy Technology
The main advantage of trading using opposite American Funds and Hennessy Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Transamerica Cleartrack Retirement | American Funds vs. Deutsche Multi Asset Moderate | American Funds vs. Jpmorgan Smartretirement 2035 | American Funds vs. Fidelity Managed Retirement |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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