Correlation Between American Funds and Hennessy Cornerstone
Can any of the company-specific risk be diversified away by investing in both American Funds and Hennessy Cornerstone 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 Cornerstone into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds American and Hennessy Nerstone Large, you can compare the effects of market volatilities on American Funds and Hennessy Cornerstone 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 Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Hennessy Cornerstone.
Diversification Opportunities for American Funds and Hennessy Cornerstone
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Hennessy is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Hennessy Nerstone Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Large 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 American are associated (or correlated) with Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Large has no effect on the direction of American Funds i.e., American Funds and Hennessy Cornerstone go up and down completely randomly.
Pair Corralation between American Funds and Hennessy Cornerstone
Assuming the 90 days horizon American Funds American is expected to generate 0.71 times more return on investment than Hennessy Cornerstone. However, American Funds American is 1.4 times less risky than Hennessy Cornerstone. It trades about 0.17 of its potential returns per unit of risk. Hennessy Nerstone Large is currently generating about 0.08 per unit of risk. If you would invest 5,331 in American Funds American on September 1, 2024 and sell it today you would earn a total of 706.00 from holding American Funds American or generate 13.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
American Funds American vs. Hennessy Nerstone Large
Performance |
| Timeline |
| American Funds American |
| Hennessy Nerstone Large |
American Funds and Hennessy Cornerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Hennessy Cornerstone
The main advantage of trading using opposite American Funds and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Hennessy Cornerstone 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 Cornerstone will offset losses from the drop in Hennessy Cornerstone's long position.| American Funds vs. Gmo High Yield | American Funds vs. Blackrock High Yield | American Funds vs. Virtus High Yield | American Funds vs. Pioneer High Yield |
| Hennessy Cornerstone vs. Hennessy Nerstone Mid | Hennessy Cornerstone vs. Hennessy Nerstone Value | Hennessy Cornerstone vs. Hennessy Total Return | Hennessy Cornerstone vs. Walden Equity Fund |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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