Correlation Between Hennessy Cornerstone and American Beacon

Can any of the company-specific risk be diversified away by investing in both Hennessy Cornerstone and American Beacon 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 Cornerstone and American Beacon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hennessy Nerstone Mid and American Beacon Intl, you can compare the effects of market volatilities on Hennessy Cornerstone and American Beacon 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 Cornerstone with a short position of American Beacon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hennessy Cornerstone and American Beacon.

Diversification Opportunities for Hennessy Cornerstone and American Beacon

0.52

Correlation Coefficient

Hennessy Cornerstone  American Beacon

Very weak diversification

The 3 months correlation between Hennessy and American is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Nerstone Mid and American Beacon Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Beacon Intl and Hennessy Cornerstone 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 Nerstone Mid are associated (or correlated) with American Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Beacon Intl has no effect on the direction of Hennessy Cornerstone i.e., Hennessy Cornerstone and American Beacon go up and down completely randomly.

Pair Corralation between Hennessy Cornerstone and American Beacon

Assuming the 90 days horizon Hennessy Nerstone Mid is expected to generate 1.1 times more return on investment than American Beacon. However, Hennessy Cornerstone is 1.1 times more volatile than American Beacon Intl. It trades about 0.05 of its potential returns per unit of risk. American Beacon Intl is currently generating about -0.03 per unit of risk. If you would invest  1,876  in Hennessy Nerstone Mid on October 3, 2024 and sell it today you would earn a total of  386.00  from holding Hennessy Nerstone Mid or generate 20.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Hennessy Nerstone Mid  vs.  American Beacon Intl

Hennessy Nerstone Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hennessy Nerstone Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

American Beacon Intl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Beacon Intl has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Hennessy Cornerstone and American Beacon

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

The idea behind Hennessy Nerstone Mid and American Beacon Intl 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.