Correlation Between Hennessy Technology and American Balanced
Can any of the company-specific risk be diversified away by investing in both Hennessy Technology and American Balanced 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 Balanced 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 Balanced Fund, you can compare the effects of market volatilities on Hennessy Technology and American Balanced 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 Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Technology and American Balanced.
Diversification Opportunities for Hennessy Technology and American Balanced
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hennessy and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Technology Fund and American Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Balanced 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 Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Balanced has no effect on the direction of Hennessy Technology i.e., Hennessy Technology and American Balanced go up and down completely randomly.
Pair Corralation between Hennessy Technology and American Balanced
Assuming the 90 days horizon Hennessy Technology Fund is expected to generate 2.73 times more return on investment than American Balanced. However, Hennessy Technology is 2.73 times more volatile than American Balanced Fund. It trades about 0.29 of its potential returns per unit of risk. American Balanced Fund is currently generating about 0.3 per unit of risk. If you would invest 2,248 in Hennessy Technology Fund on September 5, 2024 and sell it today you would earn a total of 181.00 from holding Hennessy Technology Fund or generate 8.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Hennessy Technology Fund vs. American Balanced Fund
Performance |
| Timeline |
| Hennessy Technology |
| American Balanced |
Hennessy Technology and American Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hennessy Technology and American Balanced
The main advantage of trading using opposite Hennessy Technology and American Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Technology position performs unexpectedly, American Balanced 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 Balanced will offset losses from the drop in American Balanced's long position.| Hennessy Technology vs. Veea Inc | Hennessy Technology vs. VHAI | Hennessy Technology vs. VivoPower International PLC | Hennessy Technology vs. WEBTOON Entertainment Common |
| American Balanced vs. Income Fund Of | American Balanced vs. New World Fund | American Balanced vs. American Mutual Fund | American Balanced vs. American Mutual 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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