Correlation Between Horizon Active and Horizon Active
Can any of the company-specific risk be diversified away by investing in both Horizon Active and Horizon Active 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 Horizon Active and Horizon Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Horizon Active Risk and Horizon Active Asset, you can compare the effects of market volatilities on Horizon Active and Horizon Active 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 Horizon Active with a short position of Horizon Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Horizon Active and Horizon Active.
Diversification Opportunities for Horizon Active and Horizon Active
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Horizon and Horizon is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Horizon Active Risk and Horizon Active Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Active Asset and Horizon Active 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 Horizon Active Risk are associated (or correlated) with Horizon Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horizon Active Asset has no effect on the direction of Horizon Active i.e., Horizon Active and Horizon Active go up and down completely randomly.
Pair Corralation between Horizon Active and Horizon Active
Assuming the 90 days horizon Horizon Active is expected to generate 1.75 times less return on investment than Horizon Active. But when comparing it to its historical volatility, Horizon Active Risk is 1.14 times less risky than Horizon Active. It trades about 0.07 of its potential returns per unit of risk. Horizon Active Asset is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,589 in Horizon Active Asset on August 27, 2024 and sell it today you would earn a total of 26.00 from holding Horizon Active Asset or generate 1.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Horizon Active Risk vs. Horizon Active Asset
Performance |
| Timeline |
| Horizon Active Risk |
| Horizon Active Asset |
Horizon Active and Horizon Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Horizon Active and Horizon Active
The main advantage of trading using opposite Horizon Active and Horizon Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Horizon Active position performs unexpectedly, Horizon Active 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 Horizon Active will offset losses from the drop in Horizon Active's long position.| Horizon Active vs. Horizon Active Asset | Horizon Active vs. Horizon Active Dividend | Horizon Active vs. Horizon Defined Risk | Horizon Active vs. Horizon Defensive Equity |
| Horizon Active vs. Horizon Active Risk | Horizon Active vs. Horizon Active Risk | Horizon Active vs. Horizon Active Dividend | Horizon Active vs. Horizon Active Risk |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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