Correlation Between Ariel International and Horizon Active
Can any of the company-specific risk be diversified away by investing in both Ariel International 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 Ariel International and Horizon Active into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ariel International Fund and Horizon Active Risk, you can compare the effects of market volatilities on Ariel International 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 Ariel International with a short position of Horizon Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ariel International and Horizon Active.
Diversification Opportunities for Ariel International and Horizon Active
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ariel and Horizon is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Ariel International Fund and Horizon Active Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horizon Active Risk and Ariel International 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 Ariel International Fund 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 Risk has no effect on the direction of Ariel International i.e., Ariel International and Horizon Active go up and down completely randomly.
Pair Corralation between Ariel International and Horizon Active
Assuming the 90 days horizon Ariel International Fund is expected to under-perform the Horizon Active. In addition to that, Ariel International is 1.17 times more volatile than Horizon Active Risk. It trades about -0.13 of its total potential returns per unit of risk. Horizon Active Risk is currently generating about 0.09 per unit of volatility. If you would invest 2,684 in Horizon Active Risk on August 31, 2024 and sell it today you would earn a total of 34.00 from holding Horizon Active Risk or generate 1.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ariel International Fund vs. Horizon Active Risk
Performance |
| Timeline |
| Ariel International |
| Horizon Active Risk |
Ariel International and Horizon Active Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ariel International and Horizon Active
The main advantage of trading using opposite Ariel International and Horizon Active positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ariel International 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.The idea behind Ariel International Fund and Horizon Active Risk 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.
| Horizon Active vs. Horizon Active Risk | Horizon Active vs. Calvert Aggressive Allocation | Horizon Active vs. American Beacon Small | Horizon Active vs. Ariel International 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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