Correlation Between Hennessy Technology and American Mutual
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and American Mutual 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 Technology and American Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hennessy Technology Fund and American Mutual Fund, you can compare the effects of market volatilities on Hennessy Technology and American Mutual 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 Technology with a short position of American Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and American Mutual.
Diversification Opportunities for Hennessy Technology and American Mutual
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hennessy and American is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and American Mutual Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Mutual and Hennessy Technology 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 Technology Fund are associated (or correlated) with American Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Mutual has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and American Mutual go up and down completely randomly.
Pair Corralation between Hennessy Technology and American Mutual
Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 1.89 times more return on investment than American Mutual. However, Hennessy Technology is 1.89 times more volatile than American Mutual Fund. It trades about 0.03 of its potential returns per unit of risk. American Mutual Fund is currently generating about 0.04 per unit of risk. If you would invest 1,585 in Hennessy Technology Fund on January 17, 2025 and sell it today you would earn a total of 333.00 from holding Hennessy Technology Fund or generate 21.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hennessy Technology Fund vs. American Mutual Fund
Performance |
| Timeline |
| Hennessy Technology |
| American Mutual |
Hennessy Technology and American Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and American Mutual
The main advantage of trading using opposite Hennessy Technology and American Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, American Mutual 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 American Mutual will offset losses from the drop in American Mutual's long position.| Hennessy Technology vs. Black Oak Emerging | Hennessy Technology vs. Hennessy Large Cap | Hennessy Technology vs. Hennessy Japan Fund | Hennessy Technology vs. Hennessy Small Cap |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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