Correlation Between American Balanced and Hennessy Equity

Can any of the company-specific risk be diversified away by investing in both American Balanced and Hennessy Equity 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 Equity 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 Equity And, you can compare the effects of market volatilities on American Balanced and Hennessy Equity 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 Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Hennessy Equity.

Diversification Opportunities for American Balanced and Hennessy Equity

0.72

Correlation Coefficient

American Balanced  Hennessy Equity

Poor diversification

The 3 months correlation between American and Hennessy is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced Fund and Hennessy Equity And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Equity And 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 Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Equity And has no effect on the direction of American Balanced i.e., American Balanced and Hennessy Equity go up and down completely randomly.

Pair Corralation between American Balanced and Hennessy Equity

Assuming the 90 days horizon American Balanced is expected to generate 1.46 times less return on investment than Hennessy Equity. In addition to that, American Balanced is 1.09 times more volatile than Hennessy Equity And. It trades about 0.1 of its total potential returns per unit of risk. Hennessy Equity And is currently generating about 0.15 per unit of volatility. If you would invest  1,451  in Hennessy Equity And on August 30, 2024 and sell it today you would earn a total of  66.00  from holding Hennessy Equity And or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

American Balanced Fund  vs.  Hennessy Equity And

American Balanced

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Balanced Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, American Balanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hennessy Equity And

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Equity And are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Hennessy Equity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Balanced and Hennessy Equity

The main advantage of trading using opposite American Balanced and Hennessy Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Hennessy Equity 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 Equity will offset losses from the drop in Hennessy Equity's long position.

The idea behind American Balanced Fund and Hennessy Equity And pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.